Good morning. My name is Jackie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Medtronic’s Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Ryan Weispfenning, Vice President of Investor Relations. Please go ahead.

Thank you, Jackie. 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 our fiscal year 2016 third quarter, which ended January 29, 2016. 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 division summary. We also issued for the first time a presentation that provides additional details on our revenue performance and as a result had reduced our prepared revenue by division commentary in Gary’s section. Next, you should note that many of the statements made during this call maybe 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 and 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. Unless we say otherwise, references to quarterly results increasing or decreasing are in comparison to the third quarter of fiscal year 2015, and our year-over-year growth rates are given on a comparable constant currency basis, which adjusts for the negative effect of foreign currency translation and includes Covidien plc in the prior year comparison, aligning Covidien’s prior-year monthly results to Medtronic’s fiscal quarters. These adjustment details can be found in the reconciliation tables included with our earnings press release. 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, Ryan, and thank you to everyone for joining us. This morning, we reported third quarter revenue of $6.9 billion, representing growth of 6% in the upper-half of our mid-single-digit baseline expectation. Q3 non-GAAP diluted earnings per share were $1.06, growing at 17% on a comparable constant currency basis and reflecting 1,150 basis points of leverage, significantly above our baseline expectation of 200 to 400 basis points. Our performance in Q3 was solid, with sustained execution, resulting in another quarter of market outperformance. We continue to deliver on our three growth strategies: therapy innovation, globalization and economic value; which are driving increased diversity of our growth, an important and differentiated attribute of our company. Our revenue growth may modestly ebb and flow from quarter to quarter indicative of the challenges we’re absorbing in certain businesses or regions as we capitalize on success in others. However, our confidence around the sustainability and consistency of our revenue growth within the mid-single-digit range continues to build with each passing quarter. In addition, the Covidien integration is delivering robust operating leverage, as we realized our committed cost synergies, which combined with our financial leverage, drove high-teen EPS growth and double-digit EPS leverage in Q3. Through FY 2018, as we continue to realize cost synergy benefits, we expect to be at the high-end of or exceed our EPS leverage goal of 200 to 400 basis points. While our operational performance remains strong, we recognize foreign currency translation is still a significant pressure to our bottom-line on a reported basis, as it is for most multi-national companies of our size and diversity. We’re attempting to offset this as much as possible by stretching our operations and through our conventional hedging programs. We also continue to generate significant accessible free cash flow, which…

Thanks, Omar. Third quarter revenue of $6.934 billion increased 61% as reported or 6% on a comparable constant currency basis, which excludes $344 million of unfavorable impact of foreign currency. Acquisitions and divestiture contributed a net 20 basis points to the Q3 revenue growth. Q3 non-GAAP earnings per share was a $1.06, a decrease of 1% versus the $1.07 delivered by legacy Medtronic last year, or an increase of 17% on a comparable constant currency basis after adjusting for the $0.11 impact to earnings per share from foreign currency translation. Q3 GAAP diluted earnings per share were $0.77, a decrease of 21%. In addition to the $374 million after-tax adjustment for amortization expense, this quarter’s non-GAAP adjustments to earnings on an after-tax basis were a $43 million charge for acquisition-related items, a $16 million net restructuring charge and a $25 million benefit resulting from the establishment of a deferred tax asset related to the realization of a one-time capital loss. Our Cardiac and Vascular Group, which accounted for 35% of our total company sales, grew revenue by 7%, with all three divisions growing at or above overall company growth. CRHF grew 6%, as we took significant share in a flat global implantables market. In High Power, our strong Evera MRI launch resulted in our highest U.S. High Power shares since early in the decade, despite the fact that we had declines in CRTD. While CRTD business experienced sequential growth in U.S. implants share, we also had an intentional reduction in customer inventories ahead of our Q4 CRTD MRI launch. In Coronary, we are holding global diluted earnings - drug-eluting stent share in the face of major competitor data releases and product launches, which we attribute to increasing preference for the Resolute Onyx in Europe and our CVG multiline contracts in…

Thanks, Gary. And 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; Bryan Hanson, President of our Minimally Invasive Therapies Group; Geoff Martha, President of Restorative Therapies Group; and Hooman Hakami, President of our Diabetes Group to join us. We want to try to get as many as people as possible, so please help us by limiting yourself to only one question, and if necessary a related follow-up. If you have additional questions, please contact our Investor Relations team after the call. And operator, first question, please?

Our first question comes from the line of Mike Weinstein with JPMorgan.

Thank you, guys, and good morning. Let me start with a couple of items. So, Gary, probably the first question people will have is just the operating margin expansion this quarter wasn’t - I think what people were hoping and maybe which you were thinking in the last quarter, can you just talk about how much of that was FX, which you touched on and any other comments just relative to the progression of the synergies from Covidien?

Yes, I mean, as we indicated, Mike, I mean, obviously we are getting a lot of leverage in the quarter, 1,150 basis points on the bottom line on a constant currency basis. And as I mentioned in my comments, 510 points on the operating margin line just of leverage there and 140 basis point improvement on an operating basis. Unfortunately, with foreign exchange, it has been a headwind all year, it’s having a similar negative impact on the margin, and so we didn’t get as much of improvement than you might see on an as reported basis just because of that. So as we’ve been doing all the year, where basically we are continuing to executing against our operating leverage plans and our cost takeout synergies that we have from the Covidien transaction, but as with many companies we are experiencing the foreign exchange that’s mitigating or eliminating a lot of that benefit that we are - as we roll through that. We are trying to manage that the best we can, but clearly that’s having a big impact. The Covidien synergies, the integration costs were coming in right on plan. In fact, as I mentioned in my comments we’re ahead of schedule and we’re probably going - we clearly will exceed the $300 million and $350 million that we assumed in the current year. We are seeing a lot of leverage here in Q3 and as we indicated - and even in Q4 we’ll continue to see improvement in that operating margin as a result of the synergy. So we are right in line with things, but I agree with you, I think FX is kind of camouflaging some of the real benefits you are seeing from an operations perspective.

And for FY 2017, the $0.20 to $0.25 that’s - let’s say, $0.05 to $0.10 more than maybe you were taking a month, month-and-a-half ago?

Yes. I mean, I think overall the gains are - we even said for the current quarter was like $100 million, and it is $100 million in Q4. So, I mean, we are generating almost $400 million in gains in the current year. Obviously, we are not hedged at these favorable rates next year, and as a result that’s going to have a negative impact. I think it’s a little bit higher than what we would have been expecting a month or two ago in emerging markets. Some of currencies in the emerging markets have continued to weaken and that’s become a little bit greater part of the total. But the biggest portion of the $0.20 to $0.25, the majority of that is just the hedging gains that we will not have in FY 2017 that we had in FY 2016.

Right. And then last one, the CRTD inventory drawdown that you highlighted in the quarter, any estimate for how much that was, because obviously the ICD performance was a little bit weaker than this year was expecting?

Michael Coyle will take that.

Yes. It was in the range about $15 million to $20 million.

Okay. That’s helpful, Mike. All right. Thank you, guys.

Thanks, Mike.

Thanks, Mike.

Our next question comes from the line of David Lewis with Morgan Stanley.

Good morning. Just a couple of quick questions here, I guess, Omar, I think the hallmark the last several quarters of the business has been a significant strength in the U.S. This is sort of the first quarter in a couple where we’re seeing U.S. performance is a little slower here in the third quarter versus the prior two or three quarters. It was pretty broad based. There were certain specific things you called out. Is there anything broadly you’d sort of comment on as it relates to the U.S. market performance in the quarter?

Like I had mentioned in the last call, the three things that we look at in the U.S, one is one which we knew was going to slow things out a little bit was the anniversarying of the Affordable Care Act and that probably had a little bit of an impact. The overall procedure volumes based on the economy I think were more or less steady. I think in the Surgical Solutions maybe a slight drop in procedure volumes, but essentially it was steady. There was no economy related issues. The third aspect was simply our new products. And like I said, these new products going to come and go on a quarter-by-quarter basis and in general we still had pretty strong performance from new therapies. But in prior quarters it was even stronger, given a larger kind of sort of synergy of different products coming in at the same time. I think that’s going to go float up and down and that I think is the main factor here in the change in the U.S. market. But I have to point out that our whole model is based on the diversification, because we can’t depend on just one market. And as you saw this quarter, emerging markets picked up a little bit and essentially sort of offset the drop in our U.S. revenue. But I think overall from a market perspective, it’s pretty steady.

Okay. And then, Omar for you and the broader team, I mean, obviously durable growth is what you’re trying to drive people towards.

Yes.

I think as of outside sphere over the next couple of quarters that your CRM performance is not sustainable, and obviously that’s going to weigh on kind of relative growth the next couple of quarters. Maybe, either from like why is CRM growth sustainable. And I guess Omar or for the broader team, if you think about certain franchises whether it’s Spine or PMR, what are the key franchises that start getting better as CRM performance begins to decelerate? Thanks so much.

Thanks. Mike you go first and then I’ll kind of talk about it.

Yes, actually, we see the CRHF business is being one of the prime drivers of sort of the near-term catalyst for the business over the next couple of quarters. Obviously CRTD, MRI being launched now in the United States, but with the 3T kind of CRTD MRI in Europe we think that’s going to be a big contributor. We’re going to continue to add expanded MRI capability in the standard ICD segment with Evera MRI 3T for Europe and that will follow on into the U.S. early next year. Visia AF is the single chamber offering in that space where we will be actually adding to sort of the free capability of the link diagnostics where a single chambered device were really the first device which can actually detect atrial fibrillation. We have the Micra that we would expect to come in, in the first-half of next year in the pacing segment. And after the upcoming ACC meeting we’re going to be releasing the data on the FIRE AND ICE trial, which is the first very large head-to-head comparison of CryoAblation technology to point-by-point ablation technology. Not mention in fact that we also have things like Core Valve coming into Japan and LINQ coming into Japan next year. So we think there are plenty of catalysts to keep the business growing here over the next several quarters.

Yeah. I think we’re confident in our steady growth in CVG overall and certainly in CRM. But like you point out, our business model is based on diversification of variety of other products. And I think the two examples that you gave are pertinent. I think in PMR we started seeing acceleration, especially as the ventilator starts to sort of resolve the issues that we’ve had and we expect that early next year, early next fiscal year. And in Spine, I think, we try to lay out as much detail as possible our change in approach. And we like, Geoff had mentioned earlier, we expect to see results in Spine in steady improvement every quarter. So an overall balance is what we look for. And then we also have pretty good cadence in diabetes as well. But we’re - Mike is pretty confident that we can keep our growth rate in CRM going at least to a large degree.

Great. Thanks, David. Next question, please.

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

Thank you and good morning, everybody. Omar, can you maybe come back to Spine for a second? It’s obviously a business where there’ve been several iterations of sort of a turnaround plan over the past, call it years. So I think at the analyst meeting right before announcing the Covidien acquisition you were talking about the opportunity for cross-selling within RTG, now you’re talking a little bit about ramping up the product cadence. What signpost are you watching to identify whether you have the right strategy in Spine? How long are you willing to continue to let this business underperform?

Well obviously, underperformance is not acceptable. The thing is that market is still a very attractive market for us and we’ve got core expertise. So we’re going to get this thing fixed. And then, I completely take your point. We laid out these strategies earlier. We haven’t talked about the new product in as much as depth, we talked about in general terms. But as we start to dig into it under Geoff’s leadership, we found that the way in which we were launching these products was just completely sub-optimal, which was really kind of almost compromising the value of these products. And the overall cross-RTG synergies, what was missing before as we just end on specific targets on this. That’s why we made the changes. We’ve made changes in the field-level. We’ve made changes in the overall leadership level. And we are looking at this thing closely on a quarter-by-quarter basis and we expect to see improvement. The real guideline here is U.S. Core Spine, and the correlation of the product launches to an uptick in performance. I think it’s as straight forward as that. That’s the benchmark that we are looking at. That’s the benchmark that you should look at. And we’re going to get this thing fixed and because - again, like I said, we are in a position of high share. We are in a position where we’ve got the biggest breadth with our customers. We’ve got to this thing right. So that’s the portion we are taking and those are the guidepost I suggest that we look at - we’ll point out and you should look at.

Okay. And then, maybe for Gary, I know a lot of moving parts here around currency, synergy capture et cetera. Can you maybe just help us again - I’m sorry, frame the impact that of the medical device tax suspension with currency hedging losses and how that all kind of ties into your comments around FY 2017, because I would have thought that the positive impact from the device tax suspension would at least give you some relief on currency and hedging losses? So can you maybe just walk us through the different moving parts there again?

Yes. Well, I mean, again, we are not obviously giving the FY 2017 guidance. And so, I don’t want to get too much into what’s going on there. We try to give some highlights of some things just to consider as you go through the model. But the point is, as we try to highlight here, I mean, for the current year as we go forward, we are continuing to expect the revenue growth to be in that mid-single-digit range as we go forward. We are expecting we are going to continue to get the operating synergies and be at the high-end of the - or in fact exceed probably the earnings growth that we’ve been expecting from the value capture of the Covidien transaction. And that’s going just as we expected. It’s coming in, in fact a little bit of ahead of the schedule at this point. And so we feel confident that will be positive as we go into the next fiscal year, obviously. Foreign exchange continues to be a major headwind for us as it is with the many multinational companies and ours because of the hedging programs we did. If anything - if you think about it from foreign exchange, we had a $0.45 to $0.50 impact from the current year, but that was with significant gains that we had from our hedging programs. So our impact was somewhat muted from maybe where other companies who don’t hedge were at. That is going to come to ahead for us in FY 2017. And as we indicate, that’s potentially another $0.20 to $0.25 of impact as we go into next year. You’re right; we are going to have some benefit from the medical device tax. We are getting some already in the current year that’s helping give us even more operating leverage than what we were expecting previously. But again, the foreign exchange is kind of offsetting that as we kind of drive through this. And so there is positives from the medical device fact. There is going to be positives from our share repurchase. All those are factor we have taken in consideration. But I think if you weight all those together, I think you’re going to find that they play out like we’ve indicated in our comments, because - but the issue as foreign exchange is clearly still a significant headwind for us. And then, we obviously have a tough comparison next year in FY 2017, because of the extra week we had in the current year. Those are all the factors that we try to lay out for you as you put together your models and we’ll probably obviously provide more details and more guidance as we get to our Q4 call.

Okay.

Thanks, David. We will take the next question, please?

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

Hi, thanks and good morning. So just to follow-up on that, so two questions, one for Gary, I think you said in the prepared comments that while you are not giving guidance for 2017, your directional thought on earnings on a constant currency basis was low-double-digit to low-teens, and that– but that excluded the $0.20 to $0.25, and that also excluded the negative impact of the extra week, is that right? Is that what you said?

That’s correct. I mean, Bob, what do we indicated was that - you are getting it to low-double-digits, mid-teens, what it would be, if you take out the impact for the extra week and obviously impact of foreign exchange. It was obviously you’re going to be there. So I’m not trying to minimize those. We think even with the extra week, it depends on how you look at. You are probably still, probably close to double-digit growth on the operating earnings even with the extra week in there. But without it you’re back to that lower double-digits, mid-teens is kind of the expectation. But foreign exchange of $0.20, $0.25 will obviously bring that down somewhat as we go forward. So that’s our expectations as we look for FY 2017 as far as the existing models. Now again, we’re not giving any guidance, but maybe just ran through what we provided on those key attributes that’s what you would see in your models.

Okay. So then directionally again on a reported basis for earnings that gets you to the high-single-digits depending on what ends up happening with the medical device tax, how much reinvests are down.

That’s right.

Okay. So then, thank you for that. And then, just to follow-up on one another thing for maybe for Omar or for Mike Coyle, on the High Power side, can you give us a sense as to what you expect for market growth as we look forward? And I’m just curious, did we see the same inventory drawdown when you launched your traditional ICD MRI-safe? I don’t recall that. But I just would love to get a quick history lesson. Thanks.

Go ahead, Mike.

No, we didn’t do a drawdown in advance of that. And actually we wound up delaying the launch for a few weeks to allow that to occur. So that’s what caused us to decide in this case to go ahead and do the inventory drawdown during the quarter. In terms of the overall growth of the market, as we said, we think the overall implantables market was relatively flat during the quarter. I’d point out two things to keep in mind. One is one of our competitors had an extra few days of extra week in their prior year quarter which is causing the market to look like it’s slower than perhaps it actually is, in addition to the fact that we had this drawdown that I just referenced. So if you had to correct for those items, we think the overall market was relatively flat with Low Power growing in low-single-digits and High Power basically declining in the low-single-digits. But we had both the - now a nice share capture, but also price improvements in the standard ICD segment tied to MRI. We would expect to see a similar dynamic play out in the CRTD segment which, of course, is larger. So I think that’ll probably give you the best view of what we think is going to happen going forward.

Great. Thank you very much.

Thanks, Bob. Next question?

Our next question comes from the line of Matt Miksic with UBS.

Thanks. Can you hear me okay?

Yes, we can.

So I just wanted to follow up on the numbers that you gave for your outlook, long-term outlook for the TAVR market, and obviously coming in just to touch below what one of your competitors has come in would have been, and maybe a touch below some of the comments that you talked about halfway to $5 billion I think was your language over the past couple of months. Not to make too much of that, but we would love to get a sense of how you feel about the market developing or what if anything we should read into those differences.

Okay. I’ll let Mike answer that. Go ahead, Mike.

Well, first let me correct, we never said that we thought the TAVR market was going to be $5 billion. In fact, I think, the last update we gave prior to today would have been around the $3.5 billion market around 2020, 2021. So I’m not quite sure where that comment came from. In terms of overall growth in the quarter, we were quite pleased in fact that we essentially grew with the market in the low-30% range for transcatheter valves. Obviously, that market growth is quite robust above the range of estimate that we had given previously of 25% to 30% for FY 2016. And in addition, given the fact that we had a major competitive launch into United States during the quarter, we were actually quite pleased that our global transcatheter valve business is essentially splitting the market in terms of the growth rate growing with the overall market. In terms of sort of guidance to a potential $4 billion market that was included in the commentary today, there are number of moving pieces here. Obviously, we’ve not seen relative to the intermediate risk group committees [ph] to be not inferior or superior. We obviously are just getting started with the low-risk group so we’re basically have sort of error bars, if you will, around the range. It’s probably between $3.5 billion and $4 billion in terms of 2021 kind of timeframe. And that’s where we sort of landed in the middle on the $4 billion, but I think that will give you sense of at least how we’re thinking about it today. And obviously, that will evolve as data gets presented on the performance in these patient cohorts.

Sure. That’s helpful color. Thank you, Mike. And just, Omar, just to clarify your comments on the ACA and the volume trends that’s sort of annualizing the ACA, is it fair to say, same much of that volume that you’re seeing is in the MITG space that it was sort of a pull ahead and sort of equalizing this year or is that something you’re seeing more broadly across your businesses?

No. It is primarily MITG, and maybe, Bryan, you want some color on that, go ahead.

Yes. I was very clear too, because we saw an increase for four quarters, exactly. And two quarters ago that ended. We saw basically the U.S. volumes go up to about 4% growth and now they’ve come down to about 2%, they were 3% to 4% during that fourth quarter period. And they’re 1% to 2% now. So we definitely saw an increase and a drop off as those annualized, but it’s specific…

And then, stable at that level.

Yes. It’s not like we are declining, we’re just not growing as fast as we were during that four quarter period.

Got it. Helpful, thank you.

Thanks, Matt.

Thanks.

Next question?

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

Hi, thanks for taking my question. I was just wondering, Bryan, if you could give an update on just the overall MIT Group and just any new products that we should be looking for or any highlights, I guess, as we are heading into the SAGES meeting?

Go ahead, yes, go ahead, Bryan.

Yes, sure. So generally speaking, I’d just say, if you look at MITG, everything is going well. I’ll pull back and just talk about that for a second then I’ll get into the products and health business. But we do on a monthly basis an employee engagement survey, just to kind of check the pulse of the organization as we are going through the integration. And I’m happy to say that those results come back very positive. As a matter of fact, within MITG the scores are slightly higher, even in legacy Medtronic. And so being acquired and having the number of changes that are occurring in our business and still having those scores come back in engagement perspective that high, gives me confidence that we are going to have the retention of key talent, which we’re working very hard to do and we are going to continue our momentum. So I think that’s probably first and foremost in my opinion is the most important thing. Second to that, at SAGES you’re going to see a number of nice things coming from our surgical business. I referenced in the prepared document that we have greater than 20 products across MITG being launched that will drive close a $0.5 billion in revenue over the next three years or so. So we have a very healthy portfolio of products. Just a couple that I’ll call out that you’ll see again in SAGES would be new generators that we have in our advanced energy line. One of them would be a next generation ForceTriad generator that will focus on better speed to seal and also provide the capability to drive new LigaSure instruments. That’s the most important thing about the generator. It will give us the capability to drive instruments that will be…

Okay, great. And then, just for you, Geoff, just as you’ve been now Head of the RTG Group that business had obviously some pluses and minuses. You saw some really good growth across the Neurovascular business. It’s obviously legacy Covidien unit and then some weakness still amongst the Spine business. How quickly do you think that it will take to really term, I guess, the franchises around - clearly, we’re seeing kind of the turn within R&D functions within the Cardio Vascular Group? What are some of the different things that you are doing within Spine? Are you wrapping some of the solutions around it or what’s kind of the approach in change of the, I guess, strategy within RTG?

Sure. Well, thanks, Kristen. First of all, on the businesses like Neurovascular, and particular in our Surgical Technologies business, the ENT business, Advanced Energy business, we want to ensure those continue to perform. And we feel very good about where they stand in terms of their new product launches and the new clinical data that they will have coming out, so very excited about that, and obviously a lot of questions even on this call regarding Spine. That’s a multi kind of fully –first to answer the turn around there, we have been having steady quarter-over-quarter growth over the last couple of quarters. This quarter was a little bit of step back in the U.S. And we anticipate returning to growth next quarter and a continued to steady cadence of improvement. And it’s really, there is a couple of things, one, as Omar mentioned, our Core Spine portfolio. We are excited about the products. Our upstream marketing guys have done a good job, building a number of new products. And now we are focused on the downstream commercial execution, and the launch of those products. And just this quarter we have several new ones for lumbar fusion, this VOYAGER fixation system and Elevate Expandable Cage. And the one that I am particularly really excited about is this OLIF procedure, which we think based on the physician feedback we are getting, is going to fairly disruptive to the space. And so, we have a number of those new product launches. And the big change is launching them at scale. So making sure we have the right amount of assets and inventory to launch them at scale, which is a change. The other component here is our biologic portfolio, which infuse is the biggest piece. That continues to rebound and we continue…

Okay. Thanks very much.

Thanks, Kristen. We’ll take questions from two more people, please?

Our next question comes from the line of Vijay Kumar with Evercore ISI.

Hey, guys. Thanks for taking my question. Maybe…

Can you speak up a little bit, Vijay? We can’t hear you…

Hey, guys, can you hear me now?

Yes. That’s better.

Can you hear me now?

Yes. We can. Go ahead.

Okay. Maybe one quick on the guidance, right, I think when Gary mentioned sort for low-teens EPS growth for next year, and if you offset that by 1.5% from XOV [ph] and the $0.20 to $0.25 from FX hedging gains, I just want to make sure that that low-teens EPS growth, is that assumed [indiscernible]?

I think, I caught most of it. You were breaking up a little bit as you went through it. But I mean, again, I want to make sure we’re clear, we are not giving guidance for FY 2017 yet. And we just try to put some items out there for you to think about it as we’re going forward. So I am not going to get specific about what we’ve assumed for share buybacks et cetera, because, obviously, we are not giving guidance, yet. But as we were trying to highlight in our comments, obviously, the revenue growth we would expect to continue in the mid-single-digit revenue range as we talked about. Clearly, we are going to get a significant operating leverage improvement from the earning standpoint on a constant currency basis, because of the value capture we are taking out, because of the medical device tax benefit and how much of that’s reinvested, not reinvested, will come into play as we go through that whole discussion. Obviously, as you indicated, there will be share buyback benefits that will be reflected in most numbers. And that’s why we indicated that on a constant currency basis, we would expect that we’re going to be in the low-double-digit to mid-teens earnings per share growth on a constant currency basis. We just take all those factors into consideration, that’s after you take out the extra week of your just comparing apples-to-apples. And as a result of that - then you have the FX impact coming in place. So all we are trying to highlight to people, as your assumptions going forward on our leverage assumptions et cetera are consistent with what we’ve been seeing, but just remember, FX has not went away and just remember that we had an extra week in the current year. So other than that, I don’t want to give you more on the guidance aspect. We’ll provide more details as we put together our guidance in the Q4 call.

That was helpful, Gary, and maybe one for Omar. Omar, I know that you spoke about funneling in the service offering, right. And part of it was expanding the Covidien’s surgical offerings in EM. And I’m wondering if you could provide us any sort of an update on how it’s tracking either in Europe or in active markets within Europe.

Actually, it’s striking very well. This is the moving the Cath Lab Managed Services model to the operating room. And like I mentioned before, really I got five contracts in place operating in Europe today, with contracted revenue of…

$140 million.

$140 million already from both devices and services, so that’s the - I think the pickup is about equivalent to what we’d experience with Cath Lab Managed Services about four or five quarter we expect to see; maybe accelerate that little more as we go into more geographies more quickly. But we are quite pleased with the progress there. And then we’re developing good expertise in that area.

Okay. Thanks, Vijay. We’ll take our final question.

Our final question comes from the line of Raj Denhoy with Jefferies.

Hi, good morning. Gary, I hate to come back to this. But I wanted to get to the operating margin question again. And really the reported number was just slightly below the guidance you gave of 28% to 28.5% last quarter. And I understand currency had an impact, but you did also give us currency guidance, which was - and you did come in line with that. So I guess, I’m curious, what the disconnect was between what you actually did in currency and what you thought the impact would be on the quarter.

Yes, well, I think, overall, we gave currency guidance from the standpoint of revenue, which did come in line with what we had expected. But I think where currency was a little bit greater was on the bottom line and it’s primarily because of the Argentine peso that I mentioned earlier, that that cost us an unexpected a little over $20 million, $21 million impact that we had not expected in the guidance that we provided back in the Q2 call. So that was the primary thing now. So FX was a bigger negative on the bottom line in the quarter, that what we had originally expected at the beginning of the quarter. As you indicated, the revenue was right in line, but the bottom line was a larger impact. So from an operating margin perspective, we came in with basically where we expected originally, but it was little bit more offset on the bottom line from FX than what we had originally expected.

And so, when we think about - you gave us guidance also for the fourth quarter here of 31% to 31.3% on operating margins. How do again do we get comfortable - and I hate splitting hair, because I realize there’s only 20 basis points or so. But given that it’s sort of the marker that investors are using for the integration of Covidien, how do we get comfortable that we won’t again see perhaps an outsize impact on currency or is it just simply the nature of the beast here?

Again, I wish, I could predict currency and be able to tell you that there is not going to be surprises to positive or negative on the currency side. So I mean, currency is what it is, I mean, though that the impact will be as we go forward. Again, we were trying to give guidance on - as you said, I mean, 20 basis points, trying to call that in our operating margin line with all the moving parts there going on is not easy. So we understand there are lots of moving parts here. Currency was negative in the quarter. I’m not expecting another devaluation here in Q4. But if it happens in one of the currencies that could be a little bit of a negative. On the other hand, what we’ve tried to provide as far as guidance on what we expect based on what we know right now and based on the current rates and where things are at, that gives the guidance on the operating margins. So we feel confident about that, assuming, again, that there are no surprises positive or negative. So that’s all the best we can do at this point in time, just to give you some indication on which direction these things are going.

No, that’s helpful.

But let me just add one comment. The key element I want to make clear is the thing that we can control. The cost take-out of the synergies that we’re getting from the standpoint of the Covidien transaction and the leverage we’re getting across to rest of the organization, that’s the piece that we can control and that is going right as expected. It’s in fact ahead of our plans, as I mentioned there in our previous comments. So the piece that we can control, we are delivering on as expected.

No, that’s clear. Thank you.

That was our final…

Okay. Go ahead - anymore, shall we close now, Ryan, go ahead.

Yes, let’s close, Omar.

Okay. Listen, first of all, I just want to also reemphasize what Gary just said. As I’ve said, ever since I started here, we can work on things that we can control. What we accept other variables and we try to understand completely, the valuation of the company is based on the actual performance. We can only kind of drive what we can control as best we can, meet our commitments and drive it aggressively as we can. And that we are completely committed to doing. And on that basis, as Gary just pointed out, the cost synergies that we expect from Covidien, we’ve got pretty granular look at that. We’re delivering. We’re delivering, this operating team is delivering and they’re stretching hard and then trying to cover for other things. But there is only so far we can go about things that are not in our control. So I just do want to make that point that we haven’t lost our operational focus on delivering these synergies one bit and in many ways are a little bit ahead of our original commitments. But there are lots of moving parts there. And then, we are optimistic about the future and our plans are pretty solid going into fourth quarter and into next year. But let me go back to the long-term and really conclude by noting that our overall long-term financial model. And let me remind you what it is. It’s consistent mid-single-digit constant currency revenue growth on a reliable basis, which we will get through the diversification of our businesses as well as geographies and our new product cadence. 200 to 400 basis points of constant currency EPS leverage over the long-term and some of that may be a little higher in the next couple of years, as we realize all the synergies from the Covidien acquisition as we saw this quarter. And then, finally returning a minimum of 50% of our adjusted free cash flow to our shareholders, that again is a commitment that we are completely living up to and we expect to see that fulfilled in the upcoming quarters. Stepping back, further look - this company is geared around fulfilling our mission, of alleviating pain, restoring health and extending life, and that mission continues. We are confident that this team can execute consistently, balancing our trade-offs and offsetting pressures and in the end we’re committed to creating long-term dependable value in healthcare. With that and behalf of the entire management team, I’d like to thank you again for your continued support and interest in Medtronic. We look forward to updating you on our progress on our Q4 call on May 31. Thank you and have a great day, everyone. Thanks.

Thank you. This concludes today’s conference call. You may now disconnect.