Good morning. My name is Vanessa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Medtronic Third Quarter Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Mr. Jeff Warren. Please go ahead, sir.

Thank you, Vanessa. Good morning. And welcome to Medtronic's third quarter conference call and webcast. During the next hour, Omar Ishrak, Medtronic Chairman and Chief Executive Officer and Gary Ellis, Medtronic's Chief Financial Officer, will provide comments on the results of Medtronic Inc.'s fiscal year 2015 third quarter which ended January 23, 2015. The acquisition of Covidien closed at the beginning of Q4 on January 26 and did not affect the Q3 operational results. Thus our comments today on Q3 results cover legacy Medtronic only. After our prepared remarks, we’ll be happy to take your questions. First, a few comments. Earlier this morning, we issued a press release containing our financial statements and our revenue by business summary. We also updated our combined historical Covidien-Medtronic financial statement presentation to include combine financials for Medtronic’s third quarter. You should 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 Medtronic’s periodic reports filed with the SEC. Therefore, we do not undertake to update any forward-looking statement. In addition, the reconciliations of any non-GAAP financial measures are available on the Investors portion of our website at medtronic.com. Finally, unless we say otherwise, references to quarterly results increasing or decreasing are in comparison to the third quarter of fiscal year 2015 and all year-over-year revenue growth rates are given on a constant currency basis. With that, I’m now pleased to turn the call over to Medtronic 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 third quarter revenue of $4.3 billion, which represents growth of 8% and Q3 non-GAAP diluted earnings per share of $1.01, growing 11%. EPS on a cash basis which we will be officially transitioning to in Q4 was a $1.07 and grew 10%. Q3 was a very strong quarter with revenue growth well above our outlook range for the fiscal year and exceeding our mid-single digit baseline goal. All three of our groups contributed to our robust performance with our largest group Cardiac and Vascular delivering impressive double-digit growth. Restricted therapies and diabetes also had solid quarters, both growing in the mid-single-digits. Our Q3 results were balanced from a geographic perspective with 8% growth in the U.S. and 7% growth in international markets. Our teams are executing on important product launches around the world and our customers are responding to our differentiated healthcare solutions that seek to demonstrate both clinical and economic value. Looking ahead, while our results were especially strong this quarter, I want to emphasize that our goal remains to deliver strong and consistent mid-single digit revenue growth. We believe therapy, innovation, globalization and economic value are not only the right strategy to achieve growth but that are our diversification, differentiated approach and competitive advantages will enable us to deliver dependable growth in healthcare. Importantly, following the close of Q3 we completed the acquisition of Covidien, a significant milestone in Medtronic's history. We believe that the combination of our two company's meaningfully accelerates our strategies, diversifies our growth profile and increases our financial flexibility. Over the long term we feel that our collective organization can become the leading integrated health technology and solutions partner to healthcare systems around the world.…

Thanks Omar. Third quarter revenue of $4.318 million increased 3.7% as reported or 7.5% on a constant currency basis after adjusting for our $158 million unfavorable impact from foreign currency. On an organic basis, revenue growth was 7% after adjusting for the impact of acquisitions and divestitures. Q3 revenue results on a geographic basis were as follows; growth in the U.S. was 8% and represented 57% of our overall sales; non-U.S. developed markets grew 5% and represented 30% of our overall sales. And growth in emerging markets was 12% and represented 13% of our overall sales. Q3 diluted earnings per share on a non-GAAP basis were $1.01, an increase of 11%. Q3 GAAP diluted earnings per share were $0.98, an increase of 31%. This quarter’s GAAP to non-GAAP adjustments on an after tax basis included; a $66 million charge for acquisition related items, primarily associated with transaction cost in connection with the Covidien acquisition; a $25 million gain on the micro divestiture within our Surgical Technologies Division; a $62 million gain on the sale of our remaining equity investment in Weigao which is earmarked to fund the Medtronic foundation and a payment that occurred back in Q2 and a $49 million in interest expense related to debt issued in advance to finance the Covidien transaction. It is worth noting that on a non-GAAP cash basis, Q3 dilutive earnings per share were $1.07, an increase of 10%. In our Cardiac and Vascular group revenue of $2.224 billion, grew 10%. Results were driven by strong double-digit growth on Low Power, Structural Heart, and AF & Other, along with mid-single digit growth in High Power and Aortic & Peripheral Vascular, partially offset by a modest decline in Coronary. In the Cardiac Rhythm & Heart Failure division revenue of $1.269 billion grew 12%, High…

Thanks Gary and before opening the lines for Q&A let me briefly conclude by reiterating that Q3 was a strong quarter for Medtronic. And as we look ahead we're excited to welcome Covidien in to our organization the operational momentum of both organizations is moving in the right direction giving us increased confidence in the future. This does not happen without a lot of hard work and discipline. I want to take a moment to express my appreciation to both the Medtronic and Covidien teams for staying focused, avoiding any distractions and delivering on their commitments during this transition period. While there are a number of moving parts in the financials as we combine the two companies and we are facing increased headwinds in the near term for foreign currency. Our priorities to sustain the operational performance of the company striving to reliably deliver in our baseline financial model mid-single digit constant currency revenue growth constant currency EPS growth 200 basis points to 400 basis points faster and returning 50% of our free cash flow to shareholders. To achieve these goals we continue to execute in our pre-primary growth strategies therapy innovation, globalization and economic value. We believe our acquisition of Covidien were meaningfully compliment and accelerate all three of these strategies strengthening our long term market competiveness as well as driving further sustainability and consistency in our long term financial performance. With that we will now open the phone lines for Q&A in addition to Gary I've asked Mike Coyle President for Cardiac & Vascular Group, Chris O'Connell President for Restorative Therapies Group and Hooman Hakami President of our Diabetes Group top join us. In the future we intend to have Bryan Hanson the new leader of the Covidien Group and in earnings call. We are rarely able to get to everyone's questions so please limit yourself to only one question and if needed only one related follow up. If you have additional questions please contact our Investor Relations team after the call. Operator, first question please? Operator [Operator Instructions] Your first question comes from the line of Mike Weinstein.

Good morning, Omar, and obviously congratulations on a very strong quarter for the Company. Let me start with a couple of items now that the transaction has closed. One, was hoping you could give us an update on your thoughts on capital allocation. You talked about the 50% return commitment and that is still in place. Can you give us updated thoughts on the split between dividend and buyback? And second, there is a number of drivers this quarter really over the last couple of quarters that have been from new products but also in some cases your market is getting better and you are gaining share in those markets. Can you just talk about the sustainability as we think about FY16 and start to think about our pro forma models? Thanks.

Let's take both your points, first of all in terms of the recurring to shareholders like we mentioned earlier our commitment remains first to sort of firm up our commitment and almost guarantee the fact that we can return 50% of our cash flow to shareholders. So that’s an important element of the Covidien transaction it enables us to do that. Now within that as you point out the mix between dividend and share buyback and something we've been considering we will think about changing that ratio. We think we have the capacity to do that. However, lots of moving parts right now and we need to kind of settle on exactly what we have, we've got we need board approval, the board meeting happen in June. So really until then we cannot make any firm pronouncement, what I will say is that our intention is to make a commitments that we can stick to that we will say something in a balanced fashion that you can rely on in the future and we're certainly looking at changing the mix to increase amount of dividend. Gary do you want to add to that.

No I think that’s right, as we've indicated there is a process we need to go through, we needed to kind of see over the next couple of quarters how things play out in the normal process as the Board will look at this split in the June timeframe and that’s when we would intent to discuss with them.

With respect to your second point Mike I agree that there were lots of new products that helped us and so we had revenue growth actually overall mid-single digit targets fuelled by lot of the new products and improving markets like you point out. Now we have a pretty rich pipeline if you think about it the drug coated balloons going to come out, in diabetes we have the 640 G in Europe which has just launched we've got a series of new products that are coming out. So we have some level of sustainability in terms of the product releases. But let me just say that the more important point here is the mid-single digit growth. There will be quarters where you go hopefully only up rather than down but our real goal here is to sustain this mid-single digit trajectory through diversification of our product lines and businesses diversification of our geographies where we get the growth from particularly from emerging markets and diversifying within emerging markets as well and finally diversifying as to the nature of the revenue more service revenues. And so if you do all of that we think we can get a business that can deliver consistently in the mid-single digits. And I think that’s what we’re reviewing on rather than swings one way or the other that may happen from quarter to quarter.

Gary, from your FY16 commentary, there was a number of puts and takes there and the challenge with the Street as you have seen with other companies over the last several weeks has been to stay on top of FX and the impact that has on each companies' earnings. Right now the Street seems to be aggregating around roughly 445 for FY16. Any preliminary thoughts on whether that is roughly the right range? Whether FX is appropriately reflected in that type of number?

Obviously we’re not giving guidance yet for FY16 and so I don’t want to comment unnecessarily on whether the 445 is right or now. But I do think back to your point Mike I think what I have seen is many people are updating their models for foreign exchange and challenging that. I mean that’s the biggest thing as we go through -- we’re going right to our planning process as we speak and so we’re trying to get a handle on this and understand as we go forward. I think most models seems to have a pretty good sense on it and kind of that as I indicated in my comments now that the $0.35 to $0.40 range is kind of where I think most people are landing somewhere little bit lower than that. I mean the issue that we have to understand is based on today’s rates and the reality is that foreign exchange rates I mean they have weakened another 5% versus additionally impact on that especially until we can get Covidien into our hedging program as we move forward because Covidien in effect for all intents and purposes is not hedged and that’s going to increase our volatility until we can get that into our own program here. So I think right now many models have an updated for foreign exchange which I think is appropriate and that’s reflected in the models and as a result of that I think in all the other parameters assuming that they put in the right interest expense and assume the kind of the operational growth and synergies that we’ve talked about I think you’re probably getting the range here discussing but again we’re not giving any guidance right now for FY16.

Your next question comes from the line of David Lewis.

Gary, I wonder if we could come back to margins for a second here. Your gross margins have been under pressure the last couple of quarters but actually this quarter they reversed that slide. I wonder if you could shift focus from gross margins to operating margins and specifically on two points. If you think about your organic growth rate, that is the highlight of this quarter, organic growth has doubled for Medtronic the last four quarters but EBITDA is still flat to down. I wonder if you could walk us through kind of EBIT commentary in your mind the last four quarters as you have for gross margin the last couple of quarters. And secondarily, as I think about your pro forma guidance with Covidien for the fourth quarter, SG&A is actually stronger or there is more leverage than what we would expect so maybe talk to us about that $850 million synergy number what we can imply about that $850 million number and how conservative it may be based on your stronger than expected fourth-quarter SG&A guidance?

Yes, well overall I mean first of all you have to understand as we go forward on lot of these things there is going to be re-classes between how Covidien has been classifying their numbers and so to be consistent with Medtronic and so it’s even harder to take a look at some of the percentages and versus where Medtronic historically has been and to make some sense out of that so I would just encourage all of you to go their investor Web site where the IR team has tried to laid out on a pro forma basis give you kind of perspective on what it looks like when you get the re-classes in there and look at the combined companies. As you indicated I mean gross margin overall which has been under a little bit of pressure especially within Medtronic itself we’re starting to see some improvement in that area overall we still expect there is more there we’re getting some favorable manufacturing variances being generated we’re getting -- and we’re seeing some of the quality cost for example that’s declining now in diabetes where we’ll expect that to occur over time here in nueromodulation. So from a Medtronic legacy perspective the gross margin as we expected we would expect to see a kind of improving with the exception of the mix issue that I mentioned also in my comments which is the fact that as NGC and some of these service businesses become more and more prevalent those are going to have a negative impact on the gross margin but not necessarily the operating margin. Back to your exact point what we really think we need to do is start focusing more as a company on the operating margin of the organization because that’s where really where…

And Gary the other area that helps to offset some of the currency pressure, next year obviously could be taxed, could you just give us an update on where Medtronic or core Medtronic sits with the IRS tax settlement and timing there? And secondarily can we assume the fourth quarter tax number is a good predictor of 2016 or not necessarily? Thank you.

Yes, as far as the tax case, we're really in the past right now the case is being heard, this is the Puerto Rico transfer price dispute that we have with the IRS, heard as we speak. We expect that will continue over the next several weeks before the trial will be concluded. And then it will depend on how much time after that it takes for the court to reach a decision and make a decision where we’re at, but we would expect that could be anywhere, I mean that could be several six to 12 months, I mean that could be a while out before we actually get a response from the decision on that one. So, we’re not necessary expecting anything in FY16 at this point in time, obviously that will be a positive if that happens, but we’re not expecting anything currently in FY16. The tax rate for the Q4 and kind of general direction that we gave you, that’s probably directionally still what we would say is where we're expecting that as we go forward, the combine rates of the two companies on a cash tax rate basis have been kind of in that 18% to 19%. We expect -- still expect that there is at least 200 basis point improvement on that just releases the financing cost as we get a better sense of that -- as we go into FY16 we’ll give more updates, but right now that’s still a good assumption to use.

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

Congratulations on the quarter and closing Covidien. Just wanted to return to some of the comments that you had made earlier just on the growth profile of being mid-single digits and driving 200 to 400 basis points of leverage. I am just curious given some of the tax advantages that you will see next year as well as the cost synergies, why can't Medtronic be more of a mid-single digit, double-digit EPS growth profile company at least more in the medium term?

Well a number of things, first of all we want to stick to mid-single digits and we did say there's 200 basis points to 400 basis points of EPS leverage on top of that. To deliver that in a sustained basis is you got lots of variables you're going to take into account, you’ve got market surprises and other things that could absorb, so we just want to be a little cautious as to what we put out there. We also think that the total shareholder return it includes the return that you get from the dividend actually takes into double digit total return, so that’s what we’re looking at, anything beyond that at this point is premature for us, I realize that there is synergies which we will get -- which will give us some enhancement of our operating leverage, but at the same time we’ve got variables to do with increasing our dividend versus what we do in terms of share buyback which we will look at. So there is lots of moving parts Kristen that we’re going to look at before we make a pronouncement and we think that overall double-digit total shareholder return is a pretty attractive proposition for company of this size especially if you can rely on that consistently. So again we think that that’s a reasonable sort of goal that we can have again reliability, consistency, sustainability comes first in mind before we get too eager about trying to bug these numbers up too high.

And then just I guess a more micro question, just on the CRM market I was wondering if we could just kind of walk through and balance some of your commentary around the success that you have been having on the high-powered side and yet it looks like your US growth rate was just about 1%. So maybe just share your view on the overall market. And then also just on the low power side, what you think the pacemaker market is doing? Obviously LINQ has been a big driver to the performance there. Maybe some comments just around that underlying business as well.

On a high power side we think globally it's still fairly flat in terms of the overall growth of the market our growth at 4% obviously represents some market share capture and the three primary drivers that will were kind of highlighted in the script the adaptive CRT and the Quadripolar lead release that we've had in the U.S has been driving market share. We think on an initials basis we're up roughly 10 points in initial market share in the CRT-D segment of the market here since the launch of those products and those have been having a nice effect on our overall growth, in addition in international in Japan the MRI safe ICD market entry has been driving significant initial market share as well. And then the TYRX product line, the anti-effective coating, it actually impacts pacing and ICD has a bigger impact on ICDs in terms of our ability to use it to both drive ASP and to drive share in replacement. So those have been the primary drivers on a high power side. On the lower power side the overall market using our kind of two quarter averaging convention is up roughly 5% inclusive of diagnostics but frankly diagnostics is the driver there and if you looked in just core pacing, the therapeutic pacing you'd see a low single digit decline on a constant currency basis for the overall market. We're obviously driving that diagnostics revenue growth and even within the pacing side we are taking market share on a mix shift towards the advice MRI pacing products in the U.S and it basically is also helping us drive growth in that area. So those are primary drivers on the implantable size.

Okay. Just as a follow-up, I guess, if you've take nearly 10 percentage points of share in CRT just in the US, I guess I would have thought that the high power business would have been up more than 1% this quarter. Is there a comp issue or is there something else moving the numbers within there? And how big should we expect diagnostics to really be? It seems like you are going to far exceed the number that you put out at the investor day back in June.

On the question prior quarter comps we have been for the last several quarters deliberately trying to take down the number of products solid in quarter end bundles, because obviously there is discounting associated with those that we would rather not be doing. And so we have seen in each of the last couple of quarters a fairly significant destocking of hospital inventories that’s included in the numbers that was particularly pronounced last quarter which is why you saw 5% growth even that we were really on an underlying basis closer to 7% growth for CBG. So that continued in this quarter not as dramatically as it was last quarter and we think we're coming to the end of that where the comparables will be fairly flat year over year going forward. The other question was diagnostics, so we said we believe this is sort of the next billion product segment for us we obviously see three patient populations driving the penetration rates we've seen. We have seen syncope, atrial fibrillation, cryptogenic stroke all of those are very under penetrated and in fact most of the revenue growth we've seen in that product segment has been concentrated to U.S and Germany and UK. So we think that there is plenty of opportunity to continue penetrating into those patient populations as well as to continue to growth of that its other geographies. So again we're going start to run into tougher comps going forward the linked product which we released mid quarter fourth quarter last year as well as frankly CoreValve with the U.S. So those are going to become tougher comps but on the other hand we have obviously numerous new product drivers that Omar mentioned including the DCB in the U.S the ability to use that to drive share of Covidien products in the Peripheral space. The Onyx product and DES in Europe the 26 and 29 CoreValve products in Europe and as I said the continued penetration of things like LINQ and TYRX into other geographies beyond the U.S.

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

Good morning, everybody. I wanted just to start, Gary, if you could go into a little bit more detail around cash access. I know what you have disclosed so far is that you should be able to get about 60% of your annual free cash flow in an unencumbered manner post the Covidien transaction. But I also think you've talked about that number potentially raising over time. Can you maybe just help us understand the mechanics of what drives that number higher and where that could ultimately go directionally speaking over time?

Yes as we've indicated before the transaction now being completed. What we basically have is the -- where we about 35% of Medtronic legacy cash flow was in effect available and 65% was in effect unavailable for use in the U.S that now with Covidien we pull all Covidien in effect is available. So just normal numbers to open 35% of Medtronic to basically about 60% of the combined company will have cash that is un-trapped and available going forward. This as a result of combining the two organizations and the two companies. And that’s the legacy Medtronic trap fees continues to be that way going forward based on how the tax rules work. And as a result of that what occurs over time however will be as over time as you have more and more the cash flow being generated from in effect un-trapped subsidiaries or un-trapped parts of the organization then your cash flow will start to improve from that 60% to whether it 65%, 70%, 75% over time. But that occurs as that basically product shift and you get cash coming from basically un-trapped locations. You can’t just make changes without making basically product shifts and making some decisions that really organizationally and operationally shift where the cash is being generated. And that’s what’s going to take time as you’ve heard as the organizations -- both organizations continue to grow and as we make investments in new product innovation going forward.

Okay, that is helpful. Then maybe just a follow-up on the more strategic side. Omar, I know you have talked a lot about the opportunity that exists to sell products like the drug coated balloon through the Covidien peripheral salesforce. But as I think about other product categories that you haven't highlighted as much, maybe you could talk about the opportunities in neurovascular for example given your presence with the neurosurgeon whether it is through neuromodulation or spine? And then also the potential to pull through some of the general surgery technologies that are used any way in the vast majority of the procedures that Medtronic is performing across the entire suite?

We just wanted to take this whole thing a step at a time and like I mentioned we’ve had two clear businesses which are separable which we are integrating into the RTG and CVG group so you -- obviously we understand the drug coated balloon but also the Neurovascular business is being integrated into our RTG group which will enable us to have a more comprehensive offering into the neuroscience departments. And I’ll let Chris comment on that in a minute. With respect to the other areas sure in concept there is lots of pieces where we can sell together. But right now if the two businesses simply preserve their growth trajectories and we get the benefits from these two kind of tuck-ins so to speak we’ll create a pretty good business which is reliable which can deliver consistently and we don’t want to risk any distractions through any complicated cross selling methods and sales teams incentives getting even different from what it was before in the short term because the risk of distraction and losing momentum in those areas can be very high. So therefore we think that a step at a time, over time some of those technologies show that there are opportunities for one sales force to have a broader basket of products depending on who the customers are. What I will point out is that our philosophy here starts with the customer and the physician and then works back to the technology we don’t start with the technology. So if customers require us, require products that come from some other group or division, that makes sense for the usage we will put it through that channel. We don’t want to force that technologies into places where customers aren’t necessarily using them. And if you really look at this slew of surgical technology products although in principal there is a lot of shared technology their usage amongst customers is actually quite separated. And we want to understand that carefully before we start doing any sorts of integration. But I’ll let Chris actually comment on the neuroscience strategy which I think is shorter term and quite exciting. Chris go ahead.

Sure, thank you. Yes, the Neurovascular opportunity is really exciting for Medtronic really the first priority as we get into that though is to help the Neurovascular organization get off the ground with the mechanical thrombectomy market growth and therapy penetration given the new clinical evidence that’s come out into the market that Omar referenced earlier. And obviously we have a lot to contribute to that given our depths of expertise in market development. So that’s really priority number one. But clearly the opportunities to leverage that therapy in our broader neuroscience strategy is there just a reminder of three main users of mechanical thrombectomy number one is the interventional neuroradiologist, number two is the neurosurgeon who is trained in endovascular techniques and the third just smaller one is interventional neurology. The market particularly in the U.S. is trending towards the neurosurgeon and as you know we have seven major product categories serving the neurosurgeon today across RTG of which we’re number one in every segment. This is the one category we’re not -- we’ve not been present in and so the opportunity to cross sell and partner with neuroscience centers is obviously very strong and we’re just in the early phases of that and we look forward to providing more information on that opportunity going forward.

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

Congrats on a very strong revenue quarter. A question for Gary. It looked like it was also a really good free cash flow quarter for you. I'm just wondering if you could give us a sense as to as you close the transaction, what is the free cash flow generation of the combined entity as you sit here today? I know it obviously improves over time but just right out of the chute, what is the free cash flow coming out of this combined entity in your view?

Well, we did have a very strong free cash flow of this quarter now that’s historical our Q3 tends to be one of the highest free cash flow quarter generations for us. And so Q1 starts out little slower and Q3 tends to be the strongest and so we saw that again this quarter and was very strong. There are some other things in the quarter, I mean obviously for example I would tell you one thing that helped our free cash flow is the hedging contract that we do have, we get hedge accounting from the P&L perspective, but basically those hedge contracts are collateralized and so actually we’re receiving cash on those as we have gains obviously on some of the contracts going forward and that was a couple of hundred million dollars of impact in the quarter which was a positive obviously from a cash flow perspective but it really relates to gains that will be recognized in future quarters as we go forward, but in general your come as right Bob that it was a very strong free cash flow and we’re comfortable that both Covidien and ourselves continue to generate a very strong cash flow. I mean I think the number that we’re looking at right now on a kind of a combined basis just kind of starting off to shoot if you look to both companies is you are somewhere in the ballpark of $7 billion of kind of a free cash flow going ahead. Now that’s obviously going to be impacted a little bit by this FX issue I mentioned that we have to understand exactly the impact of the foreign exchange on the cash flow, but in general if you just look at the two companies in the cash flow generation and the increase you would normally expect from that, I would say you are somewhere in that kind of around that $7 billion…

And then as a follow-up real quickly, why wouldn't the tax shield kick in right away relative to that 18% and 19%? Omar, I was wondering if you could just comment on which markets in the US do you think are improving? A lot of your growth is Medtronic product driven but it does feel like especially in the US certain markets are improving and getting better here. Thank you.

I think you're right look in general the overall sense that we get in the U.S. is improving across the board actually, but clearly given where the CRM market has been, I think there is clear improvement in some of those areas, on top of that you got to remember we’re a fairly big player here or the biggest player in certainly the CRM market and as our products are successful it actually grows the market up with us and things like the LINQ product, we don’t know for sure, but we’re pretty confident that it's bringing in increased sales of other implantable devices along with it and that will reflect on a stronger market. So because of our share position and I think if we succeed to pull that market with us, so I’ve got to say that from an overall market perspective if I were to buy in any way in the U.S. it's got to be in the CRM that we probably see an uptick in the market growth. But overall you can read the provider earnings just like we can and they appear to be strong that means the overall procedure of volumes are stabilizing to improving in the U.S., so that gives us confidence for the future and I think just general confidence the economy is helping us with any electric procedures as well.

Yes, just quickly on the tax rate Bob to clarify, I mean what we are saying is the combined company if you took our combined tax rates on a cash earnings per share basis, it's kind of in that 18% to 19% range what we've historically been at and we would expect that 2 points of improvement just in the financing of the transaction would be kind of immediately. So I mean basically going forward, we would assume kind of for Q4 and on that will be more in the 16% to 17% range just based on those parameters at this point. Again we’ll get more guidance as we get in to FY16, but those numbers right now are still what we would expect and back to your point -- that should start happening right away here in Q4.

Your next question comes from the line of Derrick Sung from Bernstein.

Omar, I wanted to go back to the top line growth profile here and I think you have been very clear about what the growth drivers will be kind of from a product category perspective on the Medtronic side to get you to that mid-single or even above mid-single digit growth in the near future, DCB in the high-powered new launches, etc. Could you spend some time talking about your view of the Covidien business now and what do you see as kind of the key product category growth drivers on the top line that will drive kind of that mid-single to high single-digit growth going forward on that side of the business?

Yes, look the question is based on next quarter we’ll have Brian on the call as well and he can give you a little more specifics, but our initial understanding is the following; obviously the two key strategic tuck-ins are important although in the neurovascular side it's more for product, Covidien products related growth driver that we will see. Now aside from that we see continued strength in surgical solutions within Covidien, the operating room tools, Covidien has a strong position and we see continued growth with actually very modest pricing pressure which is like less than we normally see in our other businesses. We also think that sort of their newer technologies in -- the early stage technologies also which are just being created will also have some traction the emerging markets in Covidien especially with their value products that I think the emerging markets will want before the legacy Medtronic products will have traction little longer term because those products are just being developed but those are important. And finally there is a big strategic push which I'll really let Bryan comment on next time or in future calls around an acceleration of moving to minimally invasive technologies and I think this movement open to MIS is a pretty big push that will be a focus for the Covidien group. Finally the procedural growth that we see over all in the U.S the sorts of products that Covidien has will benefit most from that much earlier than the Medtronic products because they're hospital base and the value proposition like I mentioned several times this hospital base. So that’s my attempt kind of describing some of the areas that we particularly excited about. But if you can just hold off till next quarter and you'll hear Bryan and I'm sure you'll get a lot more detail and be more specific about some of these growth items.

Sure, that is great. Thanks, Omar. As a follow-up if I could just follow-up on one of the points that you mentioned there which is emerging markets both Medtronic individually and Covidien together. So this quarter your emerging markets growth improved to 12% from I believe it was 10% for so last quarter. Can you talk about the pathway to get to mid-single-digit EM growth if not higher? And then in the context of Covidien, does Covidien give you synergies that could lead to one plus one equals three type of benefit on the emerging market side or do you also view the emerging market side of Covidien as separate similar to your prior comments on Covidien where you talked about just sort of trying to preserve growth rather than initially rather than look at the synergies? How do you see that playing out? Thanks.

First of all just get the numbers straight, I think our emerging market growth in the last quarter was also around this 12% number. But the point is that we're below at least the 15% benchmark that we set ourselves and a lot of that and Covidien is actually in the same range. We'd like to get this thing up to at least 15% if not higher that’s our goal, I think we have every expectation that we can get there and we should have every expectation as we've get there given the opportunities that exist. However and we've laid our strategies though which we'll achieve it which is channel optimization, public and private partnerships, some government deal. So there are things that we're doing that will make this growth sustainable in that range. The other thing that we're doing which I think with Covidien will help us enormously is it diversification within the emerging markets. Right now in a legacy Medtronic basis China represents about 50% of our total emerging markets. So the whole rate just depends on China going up and down in China although we've grown in the double digits in the sustain fashion is a market where the distribution channels have to be optimized overtime and there will be pluses and minuses and if we can diversify more that will help stabilize our emerging market growth to the mid-teens if you like. With Covidien China will give our 30% we'll have Middle East and Africa and Latin America in particular which will be big contributors a bigger proportion than where it was at legacy Medtronic. So the diversification with Covidien will help us. To your point about -- how do we -- are there any real synergy type things with Covidien from a revenue perspective, we…

Your next question comes from the line of Joanne Wuench from BMO.

It is Joanne Wuensch from BMO. Quickly, the LINQ starts to annualize in the fourth quarter somewhat tougher comps. But this thing seems to have a ton of momentum behind it. Should we think of it as the gift that keeps on giving as you push further and further into patients and grab more and more cardiac rhythm management market share with it?

Certainly I can think of it as a gift that keeps on giving and I mean to be fair if you look at the patient populations that Mike described they are still highly underpenetrated in those disease state, so there is a growth. But obviously the nature of that growth would be different from the comps that we had last year. But an expectation that this is a market that is still highly underpenetrated I think that’s just actually true and we need to execute to capture that. But Mike I'm sure you'll have any more comments on that Mike?

No I think as you say there is plenty of momentum in terms of the penetration rates going forward they’re low in every one of the three categories that I talked about again we’re going to be looking at 300% year-over-year growth but we will be looking at meaningful especially dollar growth associated with this. But I think the other point that Omar referenced earlier that’s important to keep in mind is this is really helping us with our device revenue as well from the standpoint that if you look at think of these patients with review LINQ we are now treating about two and half times as many this past quarter as we did a year ago in the third quarter and roughly 8% of those patients will wind up getting a pacemaker or ICD in the first year and over three 3.5 year life of a review LINQ roughly 20% of those patients will be identified as being appropriate candidates for device therapy. So, this is not only helping us within its own revenue it’s also helping us in terms of getting patients who need these therapies identified and appropriately treated and obviously if we get differential market share of those patients because we are the ones who found them.

And then my second question has to do with renal denervation. You sort of gave us a teaser at the beginning of this call starting your IDE shortly or filing the IDE shortly. What will be different this time than the last time you worked through the FDA process on the product? Thank you.

So actually a lot will be different obviously we’d be using a different device from the standpoint that the spiral device of choice we will be actually ablating a different location and with a different protocol, a lot of work went into the study design itself obviously to see if we could increase the treatment effect in the treatment arm which I’ve just referenced on how we plan to do that lower the effect in the control arm which basically we’ve been working with numerous experts in the field to identify what drug regimens and comparators should be used and they will be meaningfully different in this proposed study than what we used before. And obviously we’re going to be trying to really tighten the variability that we saw on both the treatment and control arms and we have a number of ideas and protocol to be able to deal with that. So we are meeting with FDA on a specific proposal on how we would restart this study obviously it’s going to be up to them to accept that protocol so we still have work to do but I think we know what we want to do with the next IDE study and we will see if we can come to agreement with the agency on moving forward on.

Thanks to all of you for your questions. And with that on behalf of the entire management team I’d like to thank you again for your continued support and interest in Medtronic. We’re obviously very excited about the future and we look forward to updating you on our progress in our Q4 call which as Gary mentioned earlier will be on June the 2nd. And with that I’d like to say my final words of thanks and have a great day.

This does conclude today’s conference call. You may now disconnect.