Ladies and gentlemen, thank you for standing by and welcome to the Medtronic fourth – quarter earnings 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. I will now turn the call over to Jeff Warren, Vice President of Investor Relations. Please go ahead sir.

Thank you, Lori. 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 Office, will provide comments on the results of our fourth quarter and FY14, which ended April 25, 2014. After our prepared remarks, we will 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 Investors portion of our website at Medtronic.com. And finally, unless we say otherwise, references to quarterly or annual results increasing or decreasing are in comparison to the fourth – quarter and FY13, respectively, and all year – over – year revenue growth rates are given on a constant – currency basis. 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 for joining us today. This morning we reported fourth – quarter revenue of $4.6 billion, which represents growth of 3.3% and Q4 non – GAAP diluted earnings per share of $1.12. Before providing more detail on our Q4 performance, I would like to recap FY14. We grew our FY14 revenue 4%, which was in line with our revenue outlook for the year and within our mid – single – digit baseline goal. It represented another year of delivering consistent results. We made solid progress in a number of areas over the past year, including quantifying, communicating, and executing on each of our independent growth vectors. Our first growth vector, new therapies, contributed 180 basis points of growth in FY14, as we launched several significant new products that provide tremendous patient benefit and will serve as important future growth platforms. In our emerging markets, we sustained double – digit growth, which contributed nearly 150 basis points to our overall revenue growth and represented 12% of our global business in FY14. Finally, on our third growth vector, services and solutions, we sharpened our focus and economic value, translating our efforts into new value – based business models, including our Cath Lab Managed Services and Cardiocom offerings, which combined contributed 30 basis points of growth and $51 million of incremental revenue. Healthcare payment and delivery systems are changing and evolving around the world. Through these efforts, we feel we are well – positioned not only to respond to these system changes, but to demonstrate the role medical technology and related services can play in making these healthcare transformations successful. Looking at the P&L, while we delivered a modest amount of SG&A leverage on an operational basis, we failed to meet our SG&A…

Thank you, Omar. Fourth – quarter revenue of $4.566 billion increased 2.4% as reported, or 3.3% on a constant – currency basis, after adjusting for a $39 million unfavorable impact of foreign currency. Q4 revenue results by region were as follows: Growth in the Middle East and Africa was 29%; Greater China grew 15%; growth in Latin America was 13%; other Asia – Pacific grew 5%; growth in Japan was 4%; Central and Eastern Europe grew 3%; and the growth in the US was 2%. The Western Europe and Canada region grew 1%, and South Asia declined 14%. Emerging markets grew a combined 14% in Q4 and represented 13% of our total sales mix. Q4 diluted earnings per share on a non – GAAP basis were $1.12 , an increase of 2%. Q4 GAAP diluted earnings per share were $0.44, a decrease of 54%. This quarter's GAAP to non – GAAP adjustments included and $85 – million pretax net restructuring charge, primarily related to our renal denervation business, back – office support functions in Europe, and global manufacturing consolidation; a $746 – million pretax certain litigation charge, primarily related to our global patent settlement with Edwards and our INFUSE product liability settlement; a $13 – million pretax charge related to acquisition – related items; and a $63 – million benefit related to certain tax adjustments from the IRS resolution on certain items related to the FY09 through FY11 audit. Regarding the Edwards litigation settlement, we recognized a $589 – million non – cash pretax charge, which is net of the amount previously accrued. This payment will be made using OUS cash. Our ongoing royalty rate will vary between geographies and periods of time, depending on the applicable patents, with higher royalty rates in earlier years declining over time, and the…

Thank you, Gary. And before opening the lines for Q&A, let me briefly conclude by stating that we continue to strive to reliably deliver on our baseline expectations, which are consistent mid – single – digit currency – constant currency revenue growth, consistent EPS growth 200 to 400 basis points faster than revenue on an operational basis, and returning 50% of our free cash flow to shareholders. We believe that our three growth vectors: new therapies, emerging markets, and our new independent services and solutions, will provide the fuel for mid – single – digit revenue growth. We expect our continued effort to deliver consistent and reliable performance combined with disciplined capital allocation will enable us to create long – term, dependable value in healthcare. Medtronic is uniquely positioned to lead the shift to value – based health care, directing our products and solutions to help providers, payers, and governments achieve their goals in driving more value into healthcare systems around the world. I am pleased with the early work we have done to establish our leadership position, and I look forward to sharing with you at our analyst meeting the opportunities we have ahead as we transform Medtronic from being primarily a device provider today into the premier global medical technologies solutions partner of tomorrow. With that, we will now open the phone lines for Q&A. In addition to Gary, I have asked Mike Coyle, President of our Cardiac and Vascular Group, and Chris O'Connell, President of our Restorative Therapies Group, to join us again. We are rarely able to get to everyone's questions, so please limit yourself to only one question and only one follow – up. If you have additional questions, please contact our Investor Relations team after the call. Operator, first question please.

(Operator Instructions) Your first question comes from the line of Matthew Dodds of Citigroup.

Good morning. Omar and Gary, first for you, on the SG&A, if you look at the reasons why it was higher, legal spending, that is hard to control. But incentive payments, accelerated investments, that does seem to be stuff you can control. So, can you give us more color – what happened, and how do you fix that in FY15 to get the leverage you've been talking about?

Yes, I think, Matt, let me take that first, and then maybe Gary can add on. Look, we have got a Company – first, I view that, like you point out, as controllable, and something that shouldn't happen – that kind of miss from a expected number and something that can be modeled. But we've got a Company with several layers of management. And although the targets are clear, there was a breakdown in our forecasting process, and, therefore, our control process. We are acting swiftly to plug that hole, and we'll do everything we can to avoid this in the future. But it really is a mismatch between our forecasting process and what we actually got. So, there was a breakdown there; that is all I can say.

Yes, Matt, this is Gary. To add to what Omar said, you are absolutely right; it is controllable. We've looked back to make sure that – first of all, we want to make back – try to understand what did happen, and what caused it. And it's unfortunately a small amounts, but all over the Company that created some of it. Obviously, the legal was a little bit more isolated, but we just had a breakdown in basically forecasting and accruing on the incentives as we went through the year, and that caught us by surprise at the end of the quarter. That is controllable; it's something that we should be managing on a much tighter basis. We've communicated that clearly, effectively for the rest of the Organization, and that's why we are confident that, going forward, it is one – time, that we will get that leverage back. But we clearly lost it here in Q4 that we had not counted on, and that's unfortunate. That's something we need to manage better, and we put the steps in place to make sure that happens as we go forward.

And a quick one for Chris O'Connell, if possible. On OUS spine, Gary, I'm not sure if you said that the market US and OUS was flat. I was wondering if the OUS market in spine flat, Chris, or is it still growing? And then, what is the ASP rate in the US? Is it stable at down low – single digits?

Sure. The international markets are growing a little bit faster. Overall, worldwide, the market was flattish in the quarter. And you may recall in Q4 of last calendar year, the market seemed to accelerate a bit. I think we look across the last few quarters and see an overall spine market that's up in the 1% to 2% range in that period of time, with the US being flattish and international being up in the low – to mid – single digits. And certainly that's been – that represents a somewhat of an improvement pattern over the last four to six quarters. We are seeing market conditions very stable with some gradual improvement, principally coming out of the United States.

And then the US pricing range?

Yes. US pricing has been pretty stable, down in the low – to mid – single digits, which has been offset by mix. We continue to see favorable mix increase in spine. And so, relatively flat procedures, and price and mix offsetting each other.

Thanks, Chris. Thanks, Omar. Thanks, Gary.

Your next question comes from the line of David Roman of Goldman Sachs.

Good morning. This is Matt McDonough in for David. Thanks for taking the question. My first question is on emerging markets. I was wondering if you could talk about your expectations for FY15? Given the improvement in the fourth quarter despite those headwinds in Russia and eastern Europe, I'm wondering if you see growth getting back to the high – teens, 20% level in 2015, if some of those headwinds normalize?

Yes, if the headwinds normalize, sure. That's certainly possible. We're trying to baseline this around the mid – teens; so, around 15% or so. And if those headwinds normalize, like you say, it'll go up from there. And in addition, we are putting together some of these initiatives, which we haven't fully baked into our projection, especially in terms of channel optimization, where there is margin, as well as revenue potential, and some major provider partnerships that we are also working on in self-pay markets around the world. So, we're doing everything we can to drive something above 15%, but given our history and given what we're learning, I think it's prudent to expect something in the mid – teens.

Got it. Thank you. And then, maybe as a quick follow – up, I noticed that free cash flow growth seemed to outpace EPS growth pretty noticeably in the quarter. I was wondering if you could talk about some of those dynamics causing the delta in the growth rates? Thanks.

Gary, you want to take that?

Yes. This is Gary Ellis. Just quickly, what you – historically, you see is our fourth quarter – the free cash flow is much stronger than the earnings growth; vice versa our Q1 tends to be the other way around. The Q1 tends to be a little bit lower because that's when the incentive – plan payments, and a lot of the commissions and stuff like that, are being paid out. Those accumulate as we go through the year. So, by the time you get to the fourth quarter, we tend to see an improvement on receivables. We tend to see improvements on inventory levels, as people are focused on that. Not that they're not focused during the years, but there is major efforts across our Organization, and you're starting to see all of that benefit come forward into the fourth quarter. So, it's not unusual for our fourth – quarter free cash flow to be higher as the Company wraps up the fiscal year. And then Q1 tends to be the softer of all the quarters. So, it's historically the way we see it.

I will add, though, that I think our free – cash – flow performance for the year was good. I think we've had certain initiatives we put in place, like I've mentioned over the past several years that working capital is a big initiative for the Company. And I do think, as I mentioned in the commentary, that the teams are beginning to execute along those lines.

Next question.

Your next question comes from the line of Mike Weinstein of JPMorgan.

Good morning, Mike.

Good morning. Thanks for taking the questions. The first one is just – I want to understand the puts and takes of the US this quarter. It certainly looks like the pacemaker business was strong, maybe benefited from some stocking whereas the US ICD business hopes to be the reverse. Can you just comment a bit more on that?

Yes. I will let Mike Coyle comment on it. Go ahead, Mike.

Sure, Mike. There wasn't much change in terms of the relative contribution of bulking versus run rate. In fact, there really wasn't any difference between those at all to speak of. What it comes down to is the product flow that we are seeing. So, on the low – power side, we are in a very virtuous product cycle right now, with the full – scan MRI labeling approval that we've received that's unique in the marketplace, as well as the fact that we showed some very interesting data around the use of reactive ATP to treat atrial fibrillation, with our Advisa MRI product line showing meaningful reductions in progression to permanent AF, as well as reductions in heart failure hospitalization, which is catching the attention of physicians. Probably most importantly was the release of the Reveal LINQ. That product has really taken off quite nicely. It offers not only the benefits relative to the old Reveal, of being a much smaller device that can be put in essentially subcutaneously quite easily, but it also allows the device to communicate to a bedside monitor on a 24 – hour basis without the patient having to interact with the device at all. And as a result, that, coupled with data from the CRYSTAL – AF study on cryptogenic stroke, has really provided a very nice catalyst and we account for those product revenues in the low – power product segment. On the high – power side, obviously, we have a different story in terms of the product cycle. We have, obviously, some pressure resulting from the presence of the quadripolar leads, now two competitors talking about quadripolar leads, whereas we are really trying to position against that with our – the AdaptivCRT algorithm that's unique to our device. That basically allows an elimination of forced R&D pacing in patients with intact AV conduction, which showed as meaningful reduction in hospitalizations for heart failure and progression in AF, which is something that we are beginning to get messaged at the HRS meeting. But we'll also, obviously, be supplementing our overall product offering with the TYRX approval that we have received, as well as we have submitted our own quadripolar lead, Performa lead, last month to FDA. The data looks excellent, and we would expect by the end of our fiscal year here, in the second half of the fiscal year, to have that approved in the US. And obviously, when you look outside the US, in places like Japan and Europe, we actually are getting very nice share traction in the high – power segment, where we have all of these products available to us. And really the US is the only place left where we don't have the quadripolar lead. So that's pretty much the status of our implantables business.

Okay. And then two quick follow – ups. Gary, can you talk a little bit about the driver of the tax rate moving down as much as it is, not only in the quarter, but obviously on an ongoing basis? And then, second, how does the settlement with Edwards impact your investment in the transcatheter valve space? It basically sounds like you have these minimum payments of $40 million to $60 million a year going forward. So you've got to cover those payments, so you might as well go ahead and invest in the business, and try and maximize your share as much as possible. Am I missing anything there? I want to understand how you were thinking about that business for you, now that you have this settlement in place. Thanks.

Well, with respect to the settlement with Edwards, you're correct. The good news about settling this long – going patent litigation between ourselves and Edwards is now both of us can focus on growing the market and investing in growing the market versus investing in fighting each other. And so, yes, there is a royalty stream that we've agreed to. There's an upfront payment we've agreed to, but basically now – we've set things at the table; we know what the costs are related to that. And we can now continue to invest and drive the market going forward, which will benefit not only both of us, but benefit obviously the patients and the customers. So, we actually do think this is a positive for us. The royalty rates that we've agreed to, we feel are very good, that we can work within that as far as from an investment perspective going forward, and continue to invest in the technology overall. And the first question – I forgot again – was on what?

The tax.

The tax, excuse me. On the tax decline, what we were expecting actually back in Q3, we actually had to increase the tax rate because we had some expectation that there was growing pressure on the tax rate based on what we were seeing in some of the US versus OUS split really in our profit picture. The reality is we looked at that at the end of the year. The split, where it was occurring was in Japan, the US, and some of the other OUS markets. It ended up being that we actually – there was – the actual tax rate itself was lower. And a lot of it gets back to – I won't get into all of the details, but it gets back to, for example, FX, especially in Japan. Even though Japan has been doing very well on a constant – currency basis, Japan, which is a high – tax jurisdiction, as you know, obviously on an as – reported basis with the currency being hit, obviously, is much lower overall as reported tax profits. And as a result of that, there is a benefit on the tax line. That's just one example. So, we were pleasantly surprised by that. We were not expecting that we would see much of a tax benefit. And, in fact, in Q3, we thought there was some pressure, but there ended up actually being a decline. So the 18% for the full year is consistent with what we saw last year for the full year also. As we go forward, we widen the range as a result of that. It's clear that 18% and 20% as we go forward because, obviously, the R&D tax credit is not renewed yet. But if that gets renewed, again, we are seeing that maybe we are experience a little bit lower tax rate at this point in time.

Maybe, Mike, I thought maybe Mike Coyle, who is in charge of making investments for the transcatheter valve, just say a few words about our focus on that technology.

Sure, a couple of comments. First, we've been spending substantially on litigation expenses, which will now go away, which represents a good portion of what those minimum royalties are going to be. Secondly, if you think about the blended rates, and you'll run the numbers yourself, it certainly is a royalty that is consistent with, and probably in the end, less than what we pay on resolute integrity, for example, going forward. So we have substantial capacity in a market that was $1.1 billion in our last fiscal year, growing at 20% – plus, to be able to handle the royalty component here. But we are aggressively investing in the pipeline. Obviously, we were very pleased with the data coming out of the high – risk cohort. We have the Evolut R product line that is in clinical studies for CE Mark right now. We've received conditional approval to begin here in the Summer, the US clinical trial on Evolut R with its improvements to design and capturability. And we believe that those product lines are going to give us an opportunity to continue to drive share. And, obviously, we have a very active program in the Micra space that we continue to focus on, in addition to just continued improvements in the delivery systems associated with our core product line. So we view this as one of the most attractive markets in the cardiovascular space going forward, and we intend to drive leadership. And this settlement will only put us in a position to do that more effectively.

Thanks, Mike.

Your next question comes from the line of Kristen Stewart of Deutsche Bank.

Hi. Thanks for taking the question. I was just wondering if you could provide any additional details. Mike, I know you were talking about the patent settlement, but are there any conditions in terms of the number of centers that you can expand upon? Or do you really now have freedom to operate as you would like? Obviously, the conditions of CMS is very different. But in terms of the number of centers, is there anything with patent settlement that limits that?

Nothing in the agreement would limit us from being able to expand centers, expand training. So, this is a freedom – to – operate agreement. And obviously, we are paying a lot for that, but we're also now getting complete freedom to drive adoption of the CoreValve technology in the US and globally.

Okay. And then, regarding the drug – coated balloon panel – Bard is going to have there's on June 12. Any updates on timing of when you guys would expect that panel, or if you have submitted all of the final modules with the PMA?

Where we sit on the drug – coated balloon is the fourth and final module, which is the clinical module we expect to submit to FDA in the first half of June. We take the addition of Bard's drug – coated balloon product to the panel here in June 12 or 10 or whatever it is, to be a positive for us from the standpoint that there has not been a panel review on drug – coated balloon technology. And so, having that take place sooner rather than later is a good thing. We have, in the past, been able to, when we have strong data, use the fact that those data conform to the questions raised during the panel to avoid panels going forward. That, of course, will be up to the FDA. But we think having a panel for drug – coated balloon technology for SFA sooner rather than later is a good thing for the timing of our release in the US.

Okay. And then a big – picture question for Omar. How are you thinking about M&A these days? We've certainly been seeing a little bit more increased activity across the space. Do you feel like you have the right products and exposure to different end markets to really, truly get to that mid – single – digit constant – currency growth rate you strive for over the longer term? Or should we expect to see a little bit more increase in M&A activity? Thank you.

I think, Kristen, look, our philosophy around that has not changed. We've got certain – our big, core market segments in cardiovascular and restorative therapies, which includes neuromusculoskeletal, that's the way we refer to it, and surgical technologies, as well as diabetes, and a broader look at diabetes. And those are the three core areas. We intend to fill those areas out opportunistically over time, either organically or inorganically. And at the same time, we intend to invest in building out our services and solutions areas, as well as value products in emerging markets. So those are the areas of priorities for M&A. We will do M& A transactions. I think our overall goal – and there are always exceptions under certain circumstances, but our overall goal of trying to provide a non – dilutive impact of these – of the inorganic growth is still there. And we hold ourselves accountable to execute and deliver on what we said, both in EPS and the top line. And we will do M&A accordingly.

Next question.

Thank you. Your next question comes from the line of David Lewis from Morgan Stanley.

Good morning. Gary, could we come back to margin for a quick second here? And if you think about the last two years, I think we are seeing a consistent trend where GMs are slightly declining, but R&D is also coming down as you re – prioritize. And I wonder, if we think about 2015, maybe talk about that trend. But also the quality issues you have talked about several quarters now on GM, we thought those issues were beginning to alleviate here heading into 2015. So can you quantify what those issues were, the magnitude in 2014 – what magnitude drifts into 2015? And as you think about that 8.5% R&D you're saying for 2015, is that the new normal for Medtronic, or can that number still come down as you re – prioritize?

Well, as we indicated in the commentary, and as you said, David, obviously, over especially this last year, one of the things we've indicated is on the – that there's a 20 to 30 basis points of hit that we've taken on the OPC line, what we call the product cost line and our cost of sales that relates to basically quality measures that were taken into place, both especially in neuro and diabetes here in the Organization. That has required actually that those costs actually – our engineers, et cetera, who are down – who typically are doing R&D types of projects, who have had to be re – tasked to basically address past quality documentation types of issues or remediation in our product portfolio within neuro and diabetes. And that's so that since they're not doing R&D work, they are focused on quality. It gets re – classed out of R&D up into OPC. And so that's why the 8.5%, or 8.4% or 8.5% for the year has been a little bit lower, and we are forecasting that that will continue. As Omar said in his comments, right now, based on what we know, we had hoped that the neuro and diabetes quality issues would be behind us. I think diabetes is getting close. But neuro, we're assuming that basically these ongoing expenses probably continue at least through FY15, that towards the end of FY15 they maybe start to taper off. But we'll have those for the full – another full year, as we go through that warning letter, addressing the issues in the warning letter for neuro. So in our guidance of 74.5% to 75% going forward, we're basically saying we're not going to see that gross margin jump back up yet here in FY15, because we are still expecting the quality cost to be included in OPC. And we are still expecting our R&D to be down at that 8.5% level as a result of that. Once we get through FY15 and get these warning letters addressed and the quality matters all documented and complete address, then we would expect to go back to a little bit more normal rates. But it's taking us a little bit longer, especially on the neuro warning letter than what we had originally expected to get those costs back in line.

I also want to make a comment on the R&D. Look, at the end of the day, we are responsible for certain operating leverage overall, which depends on how much revenue we generate, and we hold ourselves accountable for that. At the same time, we also hold ourselves accountable to build a pipeline of technologies organically, as well as inorganically but funded, so that we can be assured that we can continue to be market leaders in the long term. And so we keep both of these things in mind as we make trade – offs. And I think you'll agree that over the past four years, past couple of years, yes, R&D spending has been down, but our productivity in terms of the growth that you have seen has certainly been there, compared to where it was before. So R&D, we don't just look at a number and say that is what we will do. We look at the quality of the programs we will invest in, their return rates, our short – and long – term pipeline; and based on that, we make intelligent decisions.

Okay. Very helpful. And then, Mike, a quick follow – up on your commentary on the US defib market. I thought I heard you mention that it's really all about product cadence for both your pacer business obviously, and for defib, and that makes sense to us. You also mentioned that there are two players in the US now with quad access in CRTD. I think I heard you correctly. Does that imply that you do believe that second entrant into the market for CRTD in the US, who only has a can, are you expecting that to be a significant impact on the Business here in the US over the next couple of quarters? Thank you.

My point was you have two different companies now talking about quadripolar technology as being something that they should be interested in using with their patients. And obviously, we are positioning our AdaptivCRT and its proven benefits in terms of heart failure re – hospitalization reduction and progression to AF reduction as proven alternative to that. Right now, unfortunately, physicians have to choose between those two things, but as soon as we get our approval in the US for the quadripolar lead, then we will have both of those things and nobody else will. So that was my only point.

Next question.

Your next question comes from the line of Bob Hopkins of Bank of America.

Hi. Thank you. Good morning. Can you hear me okay?

Yes, we can.

Great. So a follow – up on that for my first question. Mike or Omar, I would love you to comment on what you are seeing in terms of US ICD market trends? Obviously, things have looked a little bit weaker here than we would have thought. Is that a pricing issue? Is that a units issue? If it's units, what do you think is going on there? So a comment on the US ICD market would be great.

Go ahead, Mike.

So basically, since the 1st of the calendar year, we did see some slowing in terms of overall procedure volumes, and that applies to both pacing and ICDs, but it's modest in terms of the slowing. In ICDs, it is mostly replacement cycle that is here; in pacing, it looks more like initials, but those have dropped 1 point or 2 in terms of overall growth. Pricing is pretty stable in the low single – digit declines for both. And of course on the pacing side, we now – or the low power side, we now have the addition of the new growth vector in predictive diagnostics, which would be a link to offset that. So that pretty much is the dynamic that we are seeing.

Okay. And then I wanted to follow – up on the comments on the M&A, and Omar, this is a question for you. I wanted to comment in your confidence in Medtronics M&A process. In light of what's going on with Ardian and how CoreValve has given the prices you paid and now this settlement, that makes the initial price paid almost twice what you originally thought. I'm curious – does that impact your willingness to pursue technology and growth acquisitions? Are you confident in Medtronics process? And again, how does that impact the way you think about potential deal activity in 2015 and beyond?

Look, I'm very confident in Medtronic's process. And over the past three years, the acquisitions that we've done have delivered, and we've executed on them. In terms of both Ardian and CoreValve, first of all Ardian. Like I said at the ACC, look, this comes with the territory. You do clinical trials for a reason, and every so often, you are going to get negative results. And we don't give up on strategic opportunities based on that. We continue to strive on them, because we believe in the long – term need for that kind of therapy. We would have done that acquisition over again based on the data that we had at that time, and I think our team is highly qualified for that. And I actually complement our team – our Ardian team for executing to the clinical trial probably better than anyone else. So I have complete confidence in our ability to follow – up on what we say we will do. We got to accept in our modeling that some of these acquisitions may not turn out the way we want it to because of the inherent risk involved. And we have to model that in our overall mapping of opportunities. And in terms of CoreValve, yes, sure, it was a surprise, but I think actually, the overall rate of return, even including the payments that we have to make, is still in the double digits – in the teens actually. So I think CoreValve overall, again, it's – I would do over and over again. We're extremely excited about truly groundbreaking clinical results that we are getting with this. And in terms of our mission, what it does to extend life of people, what it means to us, I think that's one that we will do over again. And we will find a way to front.

Thanks. Next question.

Your next question comes from the line of Larry Biegelsen of Wells Fargo.

Good morning. Thank you for taking the question. Actually I wanted to start with Mike on Reveal LINQ. And then I had one follow – up on tax. Mike, how big can Reveal LINQ be, and why – how quickly do you think it will ramp? And then are there any reimbursement issues we should be aware of? It seems based on the feedback at HRS, it was one of the products that physicians were most excited about, and that seems to be an important growth driver for you guys in FY15.

Larry, we're going to spend some time on this topic at the analyst meeting, because it is something that we haven't really focused a lot on in commentary. I would just say there are multiple applications for these kinds of implantable loop recorders, not only in syncope, which has been the traditional market here, but we also talked about cryptogenic stroke, it's use in AF management, and the fact that we've now mooshed with technology that is so much more attractive to patients, as well as to physicians, in terms of its size, it's ease of implant, and its ability to, without patient interaction, provide a very strong diagnostic analysis, is really creating a new opportunity within this segment. We've always had the Reveal product, but it was more of a pacemaker size implant and procedure. Now we have something that we think is much more attractive to patients and physicians for use in their diagnosis and in the areas that I talked about. We very much consider this a growth driver on scale with our AF investments, in terms of its potential for return. And we'll talk a little bit more about that at the analyst meeting in a couple weeks.

I wanted to ask one on the tax rate. Gary, can you talk about what your guidance assumes for the R&D tax credit in calendar year 2014 and calendar year 2015? Because I'm asking because if the R&D tax credit reenacted for calendar year 2014 and calendar year 2015, if they reenact it for two years, is it possible that your FY15 guidance would benefit from two years of the R&D tax credit, or roughly $0.08, versus I think $0.00 in FY14? So if you could clarify what your guidance assumes and what the benefit could be, that would be helpful. Thank you.

The R&D tax credit expired as of December 2013, so we did have eight months of benefit of the R&D ax credit in FY14. And so, it's not $0 in FY14. Going forward, it's hard to say what the government will do on this. Typically, when they do extend it, they extended for a year or two, and so you do have a catch up when that occurs. Our assumption right now, and that's why we have a little bit of a broader range, obviously, on the 18% to 20%. If the R&D credit is not renewed, you would probably be obviously towards the higher end of that range. If it gets renewed, back to your point, with some, in effect, catch – up from the prior years, that's when the lower end of the range would obviously come into effect. And so the range we've given, in effect, tries to bracket around where do we think the R&D tax credit end up being. But it's not quite as extensive as you indicated, because there was eight months of benefit in our FY14. But we could end up, back to point, assuming it's renewed for all of that, you could end up with 16 months of benefits in FY15, assuming it's renewed.

Thanks, Larry. We've gone past the top of the hour. We've got time for – we'll squeeze in two last questions.

Your next question comes from the line of Raj Denhoy of Jefferies.

Hi. Good morning. I wonder if I could spend a minute on the spine business. It still remains a bit of a headwind, in a sense, or an anchor on you getting back to that mid – single – digit revenue growth target. When do you imagine you might be able to see some better performance out of this? When INFUSE could stabilize, or some of the new products might start to contribute? Some view on the outlook would be helpful.

Chris, you go ahead. INFUSE stabilization is obviously a big, big driver, so that's one piece.

Sure, thank you for the question. We've obviously been suffering through some declines in INFUSE and BKP over the past couple years, and let me quickly address those, because we've been working very hard to try to stabilize, and actually as we look forward, we think there is a very nice story developing. Obviously after the Yale publication on INFUSE last summer, we saw some softening and confusion following that. But now that the market has digested that information, we've actually seen three quarters in a row of sequential stability, which we believe points to a pattern of stability heading into next fiscal year. And so, it's our goal to see the overall INFUSE program be somewhat flattish over the next year. We are also seeing some nice encouraging trends in BKP, principally in the US. As we've continued to diversify our product line and as we look to build a bigger platform of interventional spine off our core Kyphon business, and again, our business has been relatively stable now sequentially for three or four quarters in a row, and we expect that to be somewhat flattish as we head into next year, as well. So if we get BMP and BKP to be flat, then you're going to see the overall spine franchise lift, as our course spine business has actually been reasonably stable over the past four or five quarters with some modest growth in that business. And as I pointed out earlier, the markets are stable and we believe gradually improving in core spine. And so our expectation is that the overall spine franchise continues its transition to positive growth for our overall – for the overall business.

Just a follow – up on that – would it be unwise to think about spine in aggregate being positive in terms of growth for 2015? Or is that a bit premature?

It's certainly my expectation to see modest positive contribution from spine next year.

Okay. Thank you.

One last question.

Your final question comes from the line of Joanne Wuensch of BMO Capital.

Can you hear me okay?

Sure. We can. Yes.

Thank you so much. Two strategic questions, please. One is, we are hearing or seeing actually, more companies repatriate OUS cash to reuse it in a better way. Although I do applaud you paying before the Edwards litigation out of OUS cash. Can you give me a view on how you are thinking about that? And then my second question is we've had a couple questions on this call about M&A, but we are also continuing to see companies split – spin out different divisions. And, Omar, now that you've been there for three years, what is your current thinking on that? Thank you.

Sure. Thank you. Let me take the second one first. Like I've said before, we are focused around our three strategic clinical areas: cardiovascular, restorative therapies, and diabetes. And in each of those areas, we need to fill out. To the degree that things don't fit in those core areas or don't have any technology linkages with them, and we don't think we can win those markets, they are opportunities for spin outs. And although we haven't done any recently, I can assure you that we constantly look at that, and those will happen over time, but they will fit into a strategic framework. So that's the way we look at that. And the strategic markets that we're going after, as well as the globalization of those markets, and addressing those markets across the continuum of care is the way we look at this. So from an M&A perspective, I would expect us to add more to that rather than (inaudible). But to the degree that things don't fit, sure we'll take those actions and we do look at that regularly. From a overseas cash perspective, I'll let Gary talk about it. We are certainly constrained to a degree there. But Gary, you want to?

Yes. Again, obviously, as you indicated, Joanne, all US headquarter multinational companies run into this situation that is we accumulate cash outside of the United States, and it's very expensive to bring it back into the US. So we are all constantly trying to figure out ways to effectively utilize that cash as we go forward, and so that's always a challenge for a company like Medtronic. As you indicated, the settlement with Edwards is such that we will be using OUS cash to pay for that, because as you recall, we actually used OUS cash to buy CoreValve originally. So it is viewed as an OUS entity, and we'll use OUS cash to pay for the settlement. The idea of actually bringing back cash and paying the penalty right now, we are not looking at doing that. And I think most companies who have done that have done that for basically, if they needed to for various reasons. And unless you need to, if you can continue to borrow and have effective use of that, it financially does not pay. So there is no incentive at all for us right now to bring back that cash and pay the type of penalty we would have to pay in additional taxes. So we have enough flexibility with our cash generation and our debt, such that we continue to do our capital allocation as we've discussed up to this point in time. So we have no expectation of making any change to that.

Thank you Joanne.

Thank you. Okay. Thank you, everyone, for your questions. And before concluding, I'd like to remind you that we will host our investor conference in two weeks in June the 5th in New York. We look forward to discussing in more detail the progress that we're making at Medtronic. And I would also note that we anticipate holding our Q1 earnings call on August 19. And with that and on behalf of the entire management team, I would like to thank you again for your continued support and interest in Medtronic. Thank you.

Thank you. That does conclude the Medtronic fourth – quarter earnings conference call. You may now disconnect.