Ladies and gentlemen, thank you for standing by. And welcome to Intuitive Surgical Q4 2014 Earnings Release Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session; instructions will be given at that time. [Operator Instructions] As a reminder, today's conference call will be recorded. And no I will like to turn the conference over to our first speaker, Senior Director of Finance with Intuitive Surgical, Mr. Calvin Darling. Please go ahead, sir.

Thank you. Good afternoon. And welcome to Intuitive Surgical's fourth quarter earnings conference call. With me today, we have Gary Guthart, our President and CEO; Marshall Mohr, our Chief Financial Officer; and Patrick Clingan, Director of Finance. Before we begin, I would like to inform you that comments mentioned on today's call maybe deemed to contain forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in the company's Securities and Exchange Commission filings, including our most recent Form 10-K filed on February 3, 2014, and our Form 10-Q filed on October 23, 2014. These filings can be found through our website or at the SEC's EDGAR database. Prospective investors are cautioned not to place undue reliance on such forward-looking statements. Please note that this conference call will be available for audio replay on our website at www.intuitivesurgical.com on the Audio Archive section under our Investor Relations page. In addition, today's press release and supplementary financial data tables have been posted to our website. Today's format will consist of providing you with highlights of our fourth quarter results as described in our press release announced earlier today, followed by a question-and-answer session. Gary will present the quarter's business and operational highlights. Marshall will provide a review of our fourth quarter financial results. Patrick will discuss marketing and clinical highlights. Then I'll provide our financial outlook for 2015. And finally, we will host a question-and-answer session. With that, I'll turn it over to Gary.

Thank you for joining us on the call today. 2014 has been a year of transition for Intuitive with macro economic uncertainty at the start of the year giving way to improving performance as the year progressed. At the outset, we focused on driving adoption of our platform in general surgery. And launching key new products and in increasing our organizational capability and performance in international markets, particularly Europe and Japan. The organization has responded well in the year with solid procedure performance and a strong launch of our newest generation da Vinci platform. General surgery and international procedures has become the growth engine for the business. Starting with review of procedures. Year-over-year growth was approximately 9%, led by growth in general surgery, growth in the use of da Vinci outside of the United States and the strengthening urology offset by flat annual performance in gynecology. General surgery growth was approximately 33% for the year comprised of strong growth in da Vinci colorectal surgery, hernia repair and in other general surgery procedures offset by slowing da Vinci Single Site use in cholecystectomy. While Single Site cholecystectomy procedures were up in 2014, they were down in the fourth quarter. Outside of the United States, procedure growth remains robust, rising approximately 20% over procedures in 2013 based on strength in Europe and Asia. Patrick will review procedure trends in greater detail later in the call. Looking at trends in capital sales for the year, capital placements increase in sequential quarters, helped by the launch of da Vinci Xi in the second quarter of 2014. Outside of the United States, our capital business was solid with international system strength in Europe and Asia outside of Japan. System sales weakened in Japan over 2013 as customers wait for both Xi clearance and additional reimbursement.…

Thank you, Gary. Our first quarter 2014 revenue in procedures were consistent with our press release issued on January 13. Fourth quarter revenues were $605 million, up 5% compared with $576 million for the fourth quarter of 2013, and up 10% from last quarter. Procedures for the fourth quarter grew approximately 10% compared with the fourth quarter of 2013, and approximately 9% compared with last quarter. I'll be describing our results on a non-GAAP or pro forma basis which excludes the impact of our Xi training program, legal claim accruals, stock based compensation, amortization of purchased IP, and investment impairment. We are providing pro forma information because we believe that business trends and operating results are easier to understand on a pro forma basis. I'll also summarizer our GAAP results later in my script. We've posted reconciliation of our pro forma result to our GAAP results on our website so that there is no confusion. Procedure highlights will be covered Patrick. Revenue highlights are as follows. Pro forma instrument and accessory revenue grew 4% compared with the fourth quarter of 2013 and 3% compared with the third quarter of 2014. The increase is relative to prior quarter reflect procedure growth, partially offset by customer buying pattern and the impact of the field action for our da Vinci Si Stapler. We've resolved the issue underlying the stapler and began shipping it again early in the first quarter of 2015. We also began shipment of our Xi Stapler early this quarter. Instrument and accessory revenue realized per procedure including initial stocking orders were approximately $1,830 per procedure compared with $1,930 for both the fourth quarter of 2013 and last quarter. The decrease from the prior year as well as the prior quarter reflects the timing of customer orders and the field action…

Thanks, Marshall. As mentioned earlier, total Q4 year-over-year procedures grew approximately 10% with U.S. procedures growing approximately 8% and international procedures growing approximately 21%. In U.S. urology the uptick in DVP procedure experienced in Q3 continued in Q4. Given our high-rated penetration in the U.S. prostatectomy market, our DVP volumes are likely to attract overall U.S. prostatectomy volume. Coupled with continued growth in kidney procedures, our overall U.S. urology procedure showed modest growth in 2014. In U.S. gynecology, Q4 results were similar to prior quarters in 2014 with low single digit procedure decline. dVHb volume appears consistent with expected total market benign hysterectomy procedure decline partially offset by growth in cancer procedures. Single site hysterectomy continued to display rapid early growth, off a small base. Moving onto U.S. general surgery. Adoption continues to be solid across a broad number of procedures. Colorectal and hernia adoption remains a source of strength, while cholecystectomy is declined modestly in the quarter. Over the course of 2014, we've seen shift in focus from cholecystectomy to hernia repair by our general surgeons and sales force. Despite the decline in cholecystectomy this quarter, we continue to hear positive feedback from segments of the patient and surgeon population that see value in the single incision approach of our Single Site technology, or the real time imaging of billary anatomy with our Firefly technology among advantages associated with robotic surgery. Looking more deeply at hernia repair. We are encouraged by robust procedure growth coupled with positive feedback about the clinical outcomes being generated with da Vinci surgery during these early stages of adoption. However, hernia repair is a broad term and the benefits associated with robotic and minimally invasive surgery varies across patient subsets. For ventral hernia, surgeon feedback around the ease of suturing and enhanced vision associated…

Thank you, Patrick. I will be providing you with our financial outlook for 2015. Starting with procedures. As described in on our announcement last week, 2014 total da Vinci procedures grew approximately 9% to roughly 570,000 procedures performed worldwide. During 2015, we anticipate full year procedure growth within a range of 7% to 10%. We expect similar seasonal timing of procedures in 2015 as we've experienced in previous year. With Q1 being the seasonally weakest quarter as patient deductibles are reset. With respect to revenue guidance, consistent with last year we will not be providing specific revenue guidance. We do expect 2015 capital sales to follow the historical seasonal patterns with key one being sequentially lower than the recently completed Q4. We will face foreign exchange headwinds in 2015 based upon the impacts of the stronger U.S. dollar. Turning to gross profit. We expect our 2015 pro forma gross profit margin to be fairly consistent with Q4, 2014 based upon the anticipated proportion of Xi stapler and other new products with lower gross profit margins in our product mix and the foreign exchange headwinds I mentioned earlier, partially offset by cost reduction realized during the year. Our actual gross profit margin will vary quarter-to-quarter depending largely upon product mix and systems production volume. Turning to operating expenses. We expect to grow pro forma 2015 operating expenses between 7% and 10% above 2014 levels. As we have stated previously, we believe it is fundamentally early days for computer assisted surgery and we will continue to make investments to pursue significant growth opportunities. We expect our non cash stock compensation expense to range between $180 million and $185 million in 2015, compared to $169 million in 2014. We expect other income which is comprised mostly of interest income to total between $14 million and $16 million in 2015. With regard to income tax. As Marshall described, we expect our 2015 pro forma income tax rate to be between 28% and 30% of pretax income depending primarily on the mix of U.S. and international profits. This forecast is consistent with our 2014 pro forma tax rate excluding the impact of tax reserve releases in 2014 and does not assume the reinstatement of the R&D tax credit in 2015. Our share count for calculating diluted EPS in Q4, 2014 was approximately 37.3 million shares. We estimate our Q1, 2015 diluted share count to range between 37.4 and 37.6 million shares. That concludes our prepared comments. We will now open the call to your questions.

[Operator Instructions] We take our first question from the line of Ben Andrew with William Blair. Please go ahead, sir.

Good afternoon, guys. Thanks for taking the question. Gary, can you talk a little about the investment plans in terms of dollars, breaking down international versus U.S.? Are you adding people in the field in the U.S. in 2015? And, if so, to what extent and then maybe talk a little bit more about the specific investments overseas that you are making.

Sure. With regard to sales headcount, in U.S. we'll have -- I'd anticipate modest growth in U.S. headcount not a ton. oU.S. in terms of commercial organization will be a greater source of investment. Some of it is in field headcount; some of it is clinical trial effort and dollars, some in economies and economists. So a bit of mix.

Okay. And then Marshall on the gross margin side, you gave us some good thoughts there in terms of the guidance. How much is FOREX impacting that and when should you get to a volume on Xi, Xi instrument where we would start to see a normalization of gross margin?

So will FX about little over 20% of or revenues are FX based and if you trickle that all the way down to would that impact is on the bottom line because we do have costs that are also FX based. You get down to where the impact is less than 3%. As far as the gross margin goes, we will be ramping Xi obviously production given the volumes we did last quarter. And we will continue to try up to worked down cost overall of Xi. And that's typical with all new products but I am not sure of that you should count on it getting to the fit on par with Xi. It is a more advanced, it is equipment with higher complexity.

Okay. And then you talked about the revenue per case on instrumentation being down because of the product withdrawal, should we see a bounce bank in Q1 and could it overshoot a bit even as you obviously got lower volumes but then flow through the years, so we could see a more traditional sort of stocking of instrumentation as you rollout staplers and roll these other products out?

Yes. I think that the bigger impact in quarter frankly wasn't the field state for action; it was actually a customer buying pattern. We saw fewer stocking orders being filled associated with system shipment and then the distributor buying pattern are also -- if you remember last year first quarter, we had a higher amount of sold through distributors than Q2 was down I believe. So anyway the pattern really drove more of that change than did the field action. Having said that, we would think just like we commented in Q2 that we would see more normalization over time of the instrument and accessory for our procedure.

Yes, and Ben, kind of looking forward at the IMA revenue procedure, you are looking kind of full year 2014, it was 1,880 per procedure. And as we discussed earlier, revenue, the IMA revenue based in foreign currency is definitely going to be facing headwinds based on the stronger U.S. dollar and will weigh on the overall metric and as you saw in 2014, the IMA revenue for procedure will vary from quarter - to -quarter largely based on this timing kind of factors. In regards to procedure mix, we don't necessarily see that moving the dial either up or down on that. Although there are swing items in relation to the metric. One would be our relative success with the stapler and Vessel Sealer utilization and where our revenue procedures higher on where these advanced instruments are used and conversely a higher proportion of Single Site cases would weigh on the metric.

Next we will go to the line of Bob Hopkins with Bank of America/Merrill Lynch. Please go ahead.

Hi, good afternoon and thanks for taking the questions. So Gary, just to start out, I am sorry if I missed this, but could you walk through your assumptions for buyback in 2015? If you are not assuming a buyback, I am curious as to why and what the other priorities might be for your cash.

We are not declaring anything at this time. When we think about uses of cash we really think about a couple of things One of them is use to invest in those things that we talked about, the ability to improve our presence in oU.S. market, some investment in both operational efficiency and new innovations. And the ability to respond to opportunity as it comes technologically or otherwise. Where we see opportunity to return our cash to shareholders, we've demonstrated that we will and we keep our eyes open on a routine basis for those opportunities.

Are there better M&A opportunities out there than you have seen in the past?

We have been thoughtful and persistent for years now. And so we - I wouldn't comment it strongly one way or another, only that we are thoughtful and engaged in those investigations all the time, nothing is really change in our rhythm or pattern in the last eight quarters.

And then lastly I wanted to ask for a real update on Sp. I know the timelines have moved around there. Can you just highlight exactly what your expectations are for rollout and approval milestones as we think about the course of 2015 and into 2016?

So where we are -- what we are trying to achieve on Sp, Sp is our dedicated single port platform. As we've talked about last year, our intent is to bring some of the functionality and features there. We had brought forward in Xi and have been well received by both our customers and by folks who review our products into the Sp, we are doing that now. That feels pretty good to me; I think it is the right set of decisions to make. We will develop those products and assemble them in the front half of the year and start getting customer feedback on them into the back half of the year. We are working with regulatory bodies about what submissions might look like. We don't have timeline to share with you on what our submissions will be and as those firm up, we will communicate them with you.

Okay and then maybe just sneak one more in on Japan just really quickly. I am trying to gauge your confidence on the topic of Japan and whether or not you're confident at this point in suggesting that by the time we get to 2016, we will see increases that can drive better procedure volume growth at that time. It is really a question of gauging your confidence based on what you know today.

We are actively involved. I can't give you a number or binary decision on it. We have several conversations going on and real work in several different procedure categories. There are lots of people who have high interest in Japan and in our products. Lot of our existing customers and future customers. And we are working on it diligently. There are several milestones that have to be met. Both on the path we are on and some alternative pathways. That our real decisions on the part of government decision makers as to where they want to go and how they want to proceed. And it would be premature to try forecast for you what those decisions would be.

And next we will go to the line of Tao Levy with Wedbush Securities. Please go ahead.

Hi, good afternoon. I wanted to ask a little bit if you can maybe expand on what you said in the prepared remarks regarding the early uptake in hysterectomy of the Wristed Single-Site instruments. Certainly, what type of procedures, what type of patients, which surgeons are starting to adopt it, and is it cannibalizing multi-arm hysterectomies? Anything like that would be helpful.

Sure. The primary procedure that the Wristed Needle Driver, Single Site Wristed Needle Driver being used for is benign hysterectomy and it is being pursued for patients who have interest in single incision. We see a mixture of existing robotic surgeons and those who have not approached da Vinci systems before so it is both folks who are currently engaged with us as customers and those who have not prior engaged, we see a mixture of both of those. Product is performing well; really demand has been really good. And what we really want to watch and track is what happens on reorders and how people really experience it as we go forward. We see a little bit of both in the early stages. A little bit of switching multi port procedures into Single Site and a little bit of approaching patients that otherwise would not have been done necessarily multi port robotically. So we are seeing both of those things. And we will take some quarters I think to shake out where people ultimately find that optimization. I am not too stressed about, a little bit of cannibalization here. I think that goes with the territory and we will support surgeons taking the approach they think is most appropriate.

Okay, that's helpful. The question on the price of the Si-e, I noticed in your latest presentation that's now -- has an ASP of around -- or at least last year -- of around $600,000, and the prior year, it was closer to $1 million. In terms of the pricing of that system, what is the objective? In the past, you have talked about sort of outpatient surgery being a potential opportunity if the pricing structure was correct for kind of the hospitals. Is that part of that or there's just pricing pressure, you are trying to prevent competition from coming in at a lower price?

Well, we have as you know we have a range of options, so at the low end and I don't -- I would not read that chart is saying that the ASP of Si-e is that number. I'll just showing you kind of where the low end is and that is looking at D featured Sis, the lower feature content Si-es and including things like Firefly and so on so you take those things out that moves to you low in the range. With regard to, do we think that there is possibility in other types of care, other sites of care; I think the answer that is yes. So you think about both -- there is kind of duration of care when you talk about things like outpatient, but there is both duration and location. How longer they are in the hospital and where is it being performed. And we see increases in both. Increases in shorter duration stay and increase in robotic surgery and different locations. And so Si and Si-e some of those lower prices packages are designed to give an option to some of the customers who are interesting in exploring in that space. And so we've seen some interested, I don't think it's been a wild interest, unabashed interest but we have seen some interest and we have seen some uptick. And you just see that reflected in some sales and placement numbers that we shared with you.

And just lastly, just a quick clarification, the Xi Single-Site instruments that you're talking about, that's different than the Sp?

That is different, right. So the -- exactly the Single Site instruments are the one that go through curved cannulas. They work on the same patient site platform as a Xi, the ones that we are developing now and they are kind of an instrument and accessory kit rather than a new patient site system. Sp is a dedicated single port patient site, different mechanism, different robot system that delivers it. And those are at different price points. And they have different capabilities. And as Sp progresses we will share more of what that product looks like and some of those distinctions with our customers and with you as we go.

And the next we will go to the line of Amit Hazan with SunTrust Robinson Humphrey. Please go ahead.

Thanks, good afternoon. Can you hear me, okay guys? Okay, good. Maybe let me just start with the chole side, and obviously the slowdown is quite pronounced if you think about it from 2013 to where we are in Q4 of 2014. So I know there is not one driver there. I just maybe want to get some color on the different buckets of impact, and most importantly kind of the trend line now indicates really declines are going to be in the works for next year. And just help us try to assess where the bottom might be to that category.

Let me frame for you how we are thinking about it and I'll let Patrick take you through a little bit more of the analytics of it. We look at Single Site we think there are things that are important for a procedure long term. And that it is that it is repeatable and teachable, safe and efficacious. And we think it is. There is a patient population that cares about it. And in Single Site we think that's true. And then the economics work and we think the economics works for that population. Then the question becomes one of how big is that population and what's access like and that's really what we've seen here is plenty of really gross and Patrick, I'll let you taking it from there.

Yes, Amit. And what -- when we look at where systems have I guess are pressured for access based on their volumes and we are seeing declines -- the first procedure that tends to get squeezed is a cholecystectomy. In the surgeons for which we are seeing a combination of chole and hernia where choles are declining, we are seeing total growth in the volume of procedures these surgeons are performing which is encouraging because they are finding where it fits best in their practice. But over time based on the underlying advantage of the technologies what we are hearing from surgeons, we are hearing from patients who get a single incision outcome, and given some of the underlying patient demographics and the population who gets a cholecystectomy, we are encouraged there is something here that will be a part of over the long run.

All right. And then if I can shift over to revenue per procedure again, just I think at this point I want to try to better understand the patterns of stocking order, just given kind of the volatility or variability we saw in 2014. I think specifically what I would like to understand better is the reason it has been more volatile in the last few quarters, kind of maybe asking the impact beyond the simple math of how many systems you sell in a given quarter and the stocking associated with it, but why is that more volatile? Why are you not able to control that a little bit on a -- better on a quarter-to-quarter basis?

Yes. We kind of saw similar thing in Q2 with the revenue per procedure was a bit lower than norms, and here in Q4 you had a kind of bounce bank in Q3 and we are recalling out in each of the quarter really is this timing of customer orders. In this last quarter it was timing of various types of orders including stocking orders associated with new systems sales. Fewer of those coming through in the quarter than they may have been according to historical norms. You have timing of orders within international distributors and just general timing of orders. So as I mentioned earlier not so much to do with things like procedure mix. And so is there a pattern? So this I think your question is there a pattern? I don't think there is. I think these things just tend to fluctuate quarter-to-quarter and balance out over longer period of time.

And next we will go to the line of David Lewis with Morgan Stanley. Please go ahead.

Good afternoon. Gary, just two quick questions. Going back to chole for a second, earlier in the year you reduced the price of the chole instrumentation, which actually seemed to have a successful impact on driving incremental growth. Why do you think that strategy didn't have more staying power and would you consider further cuts in chole to drive adoption of that procedure? Then kind of related, Gary, how do you think hernia and the market development around hernia is related and is there an opportunity to use a similar pricing strategy for hernia to drive adoption? And I had a quick follow-up.

Sure. So on the chole side on pricing we think that where we are right now on chole pricing with Single Site is really appropriate. If you look at a system that's getting average utilization, the consumable cost of that procedure in compare to multiple alternatives we think we are right in there in terms of being competitive and appropriate value for what Single Site can bring. So I think we are in a good spot there. I think the biggest thing and Patrick alluded to it and the biggest thing we are hearing back from our customers is that as they look at competition for time on the robot, they are making decisions about which case is get schedules and which ones are don't. And that's a near term problem, I think in the U.S. we saw an increase in procedure per system, so that turnaround in the year where we are building capacity in the beginning part of 2014. The field is now being consuming capacity on the robots in the U.S. I think hernia is driving that. And so part of that is this issue of which one does a surgeon and an institution find greater value and at the moment they have to make that decision. And I think that's been a primary driver is that competition. And we will see over time if that capacity grows out and we have a broader set of options for them to choose from, whether that modulates, we will have to watch over the next few quarters and see how these two play together. The economics of hernia are interesting and a little bit different. The laparoscopic hernia repair uses a different mix of instrument than chole's do. It is more expensive mix using one of our systems instead of laparoscopic allows for trade up some more expensive laparoscopic instruments. And so our economic value there is well supportive where we are in currently. I think that looks very good. Here the thing is that not all hernias aren't exchanged between laparoscopy and da Vinci, a lot of them are still unopened, surprising numbers are still unopened and the economics also look good there. So hernias economics -- the reports we are hearing back are pretty solid and we are feeling like we are in the pretty good position.

Great, Gary, very helpful. Just one quick question on Sp timing. It was encouraging to hear your conviction that the delay then for the system is moving according to plan, at least that's what I heard. Just trying to understand the timing here. You're going to lease this product to physicians in the first half. You're going to collect feedback from those physicians in the second half, so I am assuming that feedback is going to get incorporated into the device. Is it safe to assume there can't be a design lock, then, of the system until the end of 2015 or early 2016, or can you submit additional modules to the FDA before you have a design lock or am I just thinking about this the wrong way?

It is interesting question. I think the answer is that you are always moving to a point which you like to design to allow for submission and then further feedback and iteration right, a product design is fundamentally iterative, and when you make a decision to submit, it depends a lot on where you are, what you see and what kind of performance you are seeing in the product. So you ought to think about these as kind of sequential locks not a big one with capital well. I think from a technology development point of view I am quite pleased. I think we have a fantastic team. I think that they are bringing technologies forward that we expect and that are going to make a difference. Surgeon evaluations part of the process and so as those designs gets the point that it makes sense to get feedback, we will absolutely do it and I'll do that through multiple forums both in house and potential out of house and we will work through that.

And next we will go to the line of David Roman with Goldman Sachs. Please go ahead.

Thank you and good afternoon. Thank you for taking the questions. I wanted just to start with international, and if I look at the past two quarters, I think the third quarter you benefited from a pretty significant order in China. Then Q4 saw a nice step up in Europe. Can you maybe just sort of talk about the sustainability of this uplift outside the United States, and to what extent this is tied to some of the discretionary spending investments you have made over the course of the year versus either macroeconomic factors or other things we need to consider?

When we -- when you look at just kind of stepping back, we look at out different opportunities outside of the United States. I think that there are interesting and durable long -term opportunities oU.S. Having said that, they can be really lumpy and one of the reasons that we've seen the kind of capital lumpiness that you just described is because there are different market access requirements in different countries. For example, what approvals look like in China is totally different than what they look like in Japan. And different again from what they might look like in different parts of Europe. So long term, we are very positive and it is the motivation for the investments we made. Short term, expect lumpiness, it can require quotas or approvals or data submission and in each countries it is a little bit different.

Okay and maybe just a follow-up on the U.S. and specifically the impact of the Xi system. Could you maybe give us some feedback now that we are kind of three quarters into the launch on whether this type of -- this launch is playing out similarly to past ones, meaning that people really want to do colorectal, for example, and need the Xi to do it, or that people are getting the Xi and now they're building colorectal programs? How is the whole picture on some of those more advanced categories coming together, now that we are kind of nine months into the introduction of the system?

I think, first thing the Xi launch has exceeded our expectations in terms of mix just because in prior launches we had few different instruments and accessories that had to be brought to the market concurrently with the system launch. And now we have things like Firefly and stapling and vessels sealers, a little more complex instrument set. And so those have been launched in the market in the staggering way based on conversation with regulators and other pragmatic constraints. So it was unclear as to when different folks would step into acquire that system and we are pleased with the rate at which Xi has been adopted in U.S. and in Europe for that matter. So that part has been really good. You think about colorectal just to go back to your assertion, colorectal was growing pretty nicely on the Si base already, so there have been interest and pursued of colorectal, so there is a group of surgeons who are both interested and skilled and moving forward and Xi allows them to keep going. So in a sense it is -- that's virtual cycle. You have some folks who have experienced, Xi gives them a little greater capability as they stepped in and start to use it, they are trying to explore that greater capability and that drives further growth and so we have seen that. We have been also pleasantly surprised by feedback from some more of our longer term customers in urology and general oncology who also found better thing in Xi that perhaps exceeded what we thought they might in the very beginning.

That's helpful. If I could just sneak one more in here, Gary, you began the call, I think, with describing 2014 as a year of transition and macroeconomic headwinds, uncertainty about the Affordable Care Act. How would you describe the environment as we exit 2014 and as you've talked to customers in 2015, either on the capital side or the procedure volume side on a 12 month basis?

Yes. I think at the C-suite levels we are seeing their ability to forecast their business start improve and that they have still have to make priorities. It is not like -- it is a windfall on all fronts but they are able to project a little bit better than they were before, they've got a year of the Affordable Care Act under their belt and that gives them some confidence to start making some decisions. That said, there are still capital priority discussion and other things within this institutions and those kinds of conversations continue. On the clinical side, I think the conversation is much the way it has been for the last couple of years. I think folks are looking at outcomes and the cost they are probably pay for those outcomes and where they find values then they are willing to invest and pursuing. And so in that sense we've been pleased with the growth of general surgery in the year. It is strengthened nicely as we have gone and so that's kind of how we've seen it.

And next we will go to the line of Rich Newitter with Leerink Partners. Please go ahead.

Hi, thank you for taking the questions. Gary, I was wondering just with respect to your comments on chole regarding the time availability factor that might be contributing to the pullback and it sounds like it's a little bit of cannibalization into hernia, but what are you seeing in accounts where maybe Xi has been placed for a few months now? What are you seeing with respect to the trend of chole utilization? Is that alleviating some of the time constraint issues?

With regard to Xi systems?

Yes, so maybe where you had choles being done and a Xi was placed, which presumably, assuming it's not a first robotic placement might alleviate some of the time availability issues.

Yes. So it's actually good question. I don't have the answer at my finger tips.

Okay, fair enough. Then if I could on the procedure volume guidance, maybe Calvin, 7% to 10%, that's your range. Is it fair to assume the various momentum factors behind your different procedure categories in the fourth quarter, those are essentially how we should be thinking about the composition of growth comprising that 7% to 10% or is it just a continuation of the trends we saw in 4Q and carry those over to 2015 to model that growth rate?

Yes. I mean just kind of at high level view assumptions going into the 7% to 10% guidance range. We are anticipating similar U.S. gynecology and urology macro trends that we saw in 2014, continuing on into 2015 and we absolutely expect that the U.S. general surgery and international will continue to drive procedure growth in 2015 as they did in 2014. Particular swing items that could move you towards the lower end or the higher end of the range would be changes in those macro trends in gynecology and urology. Those are large sets of procedures and as we saw in this last couple of years, those things can definitely move to dial growth rates in early stage U.S. general surgery procedures, how they-- trajectory they follow, it is going to be important to international growth side of things and as was discussed a little earlier just how successful we are with Wristed Needle Driver contribution and how that may impact the benign hysterectomy.

And we will next go to the line of Larry Keusch with Raymond James & Associates, Inc. Please go ahead.

Hi, good afternoon. Gary, can we circle back to Sp and help us think about the procedures that again you are targeting on that system and how we should think about that relative to the current Single-Site system that is out there?

Sure. Rather than thinking about procedures I guided to what is it do differently and because I think it is early and it has a lot of long-term possibility but predicting exactly which one is when is going to be hard. What do they differently? It delivers four computer assisted or robotically assisted instrument through a parallel access that can go fairly deep into the body through an entry point. And so when we think about that, that you think about accessing the throat or the head or neck area transorally. You think about trans- umbilical things that might be able to reach that are otherwise hard to reach with an architecture like Single Site or trans-anal procedures or transvaginal procedures now you can think a lot about and we think about what if these stages that surgeons can affect, positively impact with the technology like that or an opportunity like that. And they are fairly diverse and pretty interesting. And then you have to go all the way through some of the testing and evaluation that we were talking about during this year which is what can actually done and that what kind of efficiency and what kind of price points and that's where the heavy lifting is. So on a long term, I think it will open some interesting doors. Near term, we are not ready to call procedure side as --

Okay, and then just lastly, if you could maybe dissect a little bit about the procedures as you look through the year and talk a little bit about the seasonality that you saw actually in the benign procedures through the year. I am just curious if those -- if there are any observations that you can make relative to benign procedures --

It is a good question. I'll have Patrick to jump in.

Hi, Larry. I think if you just look at the way in which the year played out, the first quarter tended to be a little bit weaker relative to the rest of the year, so from an extent you could say that there was more seasonality and some of those benign procedures over the course of the year, that said at the beginning of the year there were also a lot of disruption with the implementation the Affordable Care Act. So it is hard to necessarily pin it on seasonality. But to the extent that there was seasonality last year, just beware because we still have a significant component of our business in those benign procedures.

That was the last question, thank you. As we've said while we focus on financial metrics such as revenue, profit and cash flow during this conference call. Our organizational focus remains on increasing patient value by improving surgical outcome and reducing surgical trauma. I hope you are following the assessment of latest system the da Vinci Xi by Dr. Harkins, a Texas general surgeon, gives you some sense of the impact our products have in surgery. Cole, despite my obvious interest in minimally invasive surgery, I had resisted adopting previous da Vinci platforms because of what I felt the limitations. The da Vinci Xi platform is a game changer for me. And I now feel that this technology will not just equal my standard laparoscopic abilities but actually allow me to reach new levels in providing surgical care to my patients. We have built our company to take surgery beyond the limits of the human hand and I assure that we remain committed to driving the vital few things that truly make a difference. This concludes today's call. I thank you for your participation and support on this extraordinary journey to improve surgery. And I look forward to talking with you again in three months.